Question
Complete the form 1120 Information on Building & Equipment Depreciation and Sale: Building: Acquired February 22, 2015 for $196,500 and used in the business For
Complete the form 1120
Information on Building & Equipment Depreciation and Sale:
Building:
- Acquired February 22, 2015 for $196,500 and used in the business
- For book, straight-line depreciation over 40 years
- For tax, straight-line depreciation 39-year property, mid-month convention applies.
- Sold July 1, 2018 for $190,500
| Amount Realized |
|
| $190,500 |
| Adjusted Basis: |
|
|
|
| Cost |
| $196,500 |
|
| Minus: Depreciation 2015 | 4,506 |
|
|
| Depreciation 2016 | 4,913 |
|
|
| Depreciation 2017 | 4,913 |
|
|
| Depreciation 2018 | 2,457 |
|
|
| Total Depreciation |
| (16,789) |
|
| Book Basis at time of sale |
|
| (179,711) |
| Book Gain on Sale of Building |
|
| 10,789 |
Equipment 1:
- Acquired October 10, 2016 for $20,000
- For book, 10-year straight-line depreciation with half-year convention
- For tax, 7-year MACRS property for which the corporation made no Sec. 179 election and elected out of bonus depreciation. Half-year convention applies.
- Sold May 5, 2018 for $18,375 plus the buyer assumed the outstanding loan of $4,125
| Amount Realized |
|
| $22,500 |
| Adjusted Basis: |
|
|
|
| Cost |
| $20,000 |
|
| Minus: Depreciation 2016 | 5,000 |
|
|
| Depreciation 2017 | 2,000 |
|
|
| Depreciation 2018 | 833 |
|
|
| Total Depreciation |
| (7,833) |
|
| Book Basis at time of sale |
|
| (12,167) |
| Book Gain on Sale of Equipment 1 |
|
| 10,333 |
Equipment 2:
- Acquired January 5, 2018 for $343,950
- For book: 10-year life, straight-line depreciation
- Book depreciation in 2018: 34,395
- For tax, 7-year MACRS property.
Other Information:
- Rental Income is comprised of the following:
- Rental income payments received and earned this year 4,000
- Rental income payments received in the past year, but earned this year 7,500
- Rental income payments received in the current year, but earned next year 5,000
- In November of 2018, the corporation also entered into a contract with a major retailer to provide $1,000,000 worth of product in 2019. The company was paid the full 1,000,000 in December 2018 but will not deliver the product until February 2019. The company will not recognize the 1,000,000 for book purposes until 2019.
- Service Income is derived from a contract signed on October 1, 2017 that states the company will provide consulting services for 24 months (starting October 1, 2017). The company was paid in full $18,000 for the engagement on October 1, 2017. For book, the company will recognize $2,250 in 2017, 9,000 in 2018, and 6,750 in 2019.
- Holy Guacamole Corporation had a net Sec. 1231 loss in 2015 of $3,000 and did not dispose of any Sec. 1231 assets in years before or after 2015.
- For tax purposes, only $16,800 of the bad debt expense is deductible.
- For tax purposes, only $4,875 of the warranty expense is deductible.
- Holy Guacamole Corporation purchased 150 shares of Wawa Corp. stock (less than 20% owned) on July 15, 2013 for $73,500 and sold 150 shares on November 11, 2018 for $40,125.
- The company received a bill for their 2018 annual property taxes of $10,000 in December 2018 that will be paid in February of 2019. The property taxes are a reoccurring expense that was included in book income in 2018.
- On January 1, 2018 the company prepaid their rent on their office building for two years in the total amount of $40,000. The company expensed $20,000 in 2018 for book purposes.
- On July 1, 2018 the company paid $12,000 for a 12-month insurance policy that began on July 1, 2018. For book purposes, the company expensed 6,000 in 2018.
- Holy Guacamole Corporation made $180,000 in estimated tax payments throughout the year.
- The Corporation has no other equipment or assets and has not engaged in any other transactions except for the ones described above.
| Mock Form 1120 Page 1 |
|
| Ln 1 Sales |
|
| Ln 2 Costs of goods sold |
|
| Ln 3 Gross profit (Subtract Ln 2 from Ln 1) |
|
| Ln 4 Dividends |
|
| Ln 6 Gross Rents (Schedule 1) |
|
| Ln 8 Capital gain net income (Schedule 2) |
|
| Ln 9 Net gain/loss on sale of assets Ordinary Income (Schedule 3) |
|
| Ln 10 Other Income (Schedule 1) |
|
| Ln 11 Total Income (Add Ln 3 through 9) |
|
| Ln 15 Bad debts |
|
| Ln 16 Rents |
|
| LN 17 Taxes and licenses |
|
| Ln 20 Depreciation (Schedule 4) |
|
| Ln 26 Other deductions (Schedule 5) |
|
| Ln 27 Total deductions (Add Ln 15 through Ln 26) |
|
| Ln 28 Taxable income before DRD (Subtract Ln 27 from Ln 11) |
|
| Ln 29 Dividends received deduction (Schedule 6) |
|
| Ln 30 Taxable Income (Subtract Ln 29 from Ln 28) |
|
| Ln 31 Total Tax (Schedule 7) |
|
| Ln 32 Tax payments |
|
| Ln 34 Amount Owed |
|
| Ln 35 Overpayment |
|
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Effective Auditing For Corporates Ensuring That All The Risks Are Covered
Authors: Bloomsbury, Joe Oringel
1st Edition
1849300445, 978-1849300445
