COMPUTE COMPANY, INC. --- COMPUTE CORPORATE TAX RETURN ON ProCONNECT

(A C-CORPORATION)

Compute Company, Inc., is a consulting firm, which assists educational organizations in developing their computer software programs. Compute's address is 4001 N.W. 42nd Street, Gainesville, FL 32601, its telephone number is 352-989-8621, and its employer identification number is 38-1506984. Compute's Business Activity Code No. is 541519.

The company was incorporated in Florida and started business on February 2, 2019. Matthew Peters and Margaret Smith (not related in any way) started the business with a cash investment of $100 per share. Matthew purchased 1,200 (60%) shares of common stock and Margaret purchased 800 (40%) shares of common stock. There has been no change in the stockholdings since incorporation. Both Matthew and Margaret devote 100% of their time to the business. Matthew is President and Secretary of the company and Margaret is Vice-President and Treasurer.

Compute Company does not allow any expense accounts; however, properly substantiated expenses are reimbursed. Both officers are U.S. citizens.

Other pertinent information about the company's activities is summarized below:

COMPUTE COMPANY, INC. (A C-CORPORATION) Compute Company, Inc., is a consulting firm, which assists educational organizations in developing their computer software programs. Compute's address is 4001 N.W. 42nd Street, Gainesville, FL 32601, its telephone number is 352-989-8621, and its employer identification number is 38-1506984. Compute's Business Activity Code No. is 541519. The company was incorporated in Florida and started business on February 2, 2019. Matthew Peters and Margaret Smith (not related in any way) started the business with a cash investment of $100 per share. Matthew purchased 1,200 (60%) shares of common stock and Margaret purchased 800 (40%) shares of common stock. There has been no change in the stockholdings since incorporation. Both Matthew and Margaret devote 100% of their time to the business. Matthew is President and Secretary of the company and Margaret is Vice-President and Treasurer. Compute Company does not allow any expense accounts; however, properly substantiated expenses are reimbursed. Both officers are U.S. citizens. Other pertinent information about the company's activities is summarized below: 1. Compute has always used a calendar year-end. 2. The cash method of accounting was adopted in the initial tax year and has been continuously used 3. Dividends of $15,000 were paid to the stockholders on December 15, 2021. This was the first dividend paid in corporate history. 4. All state and federal estimated tax payments were made by year-end. Federal estimated tax payments made in 2021 were: April 15, 2021 CK No. 364 June 15, 2021 CK No. 583 September 15, 2021 CK No. 847 December 15, 2021 CK No. 1046 $4,000 $4,000 $4,000 $4,000 5. The corporation was not a grantor to a foreign trust, nor does the corporation maintain a foreign bank account or foreign security account. 6. The corporation's retained earnings balance is approximately the same as its E&P balance. 7. Annual gross receipts for the two preceding taxable years was: 2019 - $257,500; 2020 - $473,000. 8. No net operating loss, capital loss, general business credit or other carryovers to 2021 exist. 9. Compute made the appropriate election in 2019 to amortize organization costs. 10. Any overpayments of taxes are to be credited against next year's federal tax liability. 11. All employees, including the officers, receive fringe benefits of group term life insurance, accident and health insurance, and a qualified pension plan. Compute is not a member of a controlled group. 12. 13. Addresses and compensation of the officers are: Matthew Peters, S.S. No., 416-78-9209 4608 N.W. 42nd Avenue Gainesville, FL 32608 2021 Compensation - $84,000 Margaret Smith, S. S. No., 239-36-0824 312 S. E. 12th Street Gainesville, FL 32602 2021 Compensation - $76,000 Schedule of 2021 Book Depreciation Property Cost Method Life 30 Yr. 5 Xr 5 Yr Building 2019 Honda Delivery Van Furniture Computer #1 Computer #2 Computer #3 Printer #1 Printer #2 Date Acquired 2/10/19 3/01/19 7/22/20 2/16/19 2/05/19 7/01/19 4/08/21 2/05/19 3/01/21 $120,000 14,500 18,400 6,000 28,000 17,000 22,000 1,200 2,800 S/L S/L S/L S/L S/L S/L S/L S/L S/L 10 Yr. 5 Yr 5 Yr. 5 Yr. 3 Yr. 3 Yr. Prior Yrs. Allowance S 7,667 5,317 1,533 1,100 10,733 5,100 -0- 767 -0- Current Provision $ 4,000 2,900 3,680 600 5,600 -0- 3,300 67 778 Total $229,900 $32,217 $20.925 Compute Company, Inc. Balance Sheet For January 1, 2021 and December 31,2021 ASSETS Balance 1/1/2021 Balance 12/31/2021 Cash $ $ 34,212 40,000 62,600 U.S. Treasury Notes Marketable Securities Land Held for Investment Fixed Assets Minus: Accumulated Depreciation Organization Costs Minus: Amortization Land 6,489) 20,000 38,500 12,000 205,100 (32,217) 1,000 (400) 68,000 211,700 (47,208) 1,000 (600) 68,000 Total $ 318,472 $ 369,704 LIABILITIES AND EQUITY $ $ Notes Payable-Current Maturities Notes Payable-Noncurrent Maturities Mortgage Payable-Current Maturities Mortgage Payable-Noncurrent Maturities Capital Stock Retained Earnings 2,735 14,630 1,890 56,150 200,000 43.067 2,460 11,050 2,250 47,565 200,000 106,379 Total $ 318,472 $ 369,704 Compute Company, Inc. Statement of Retained Earnings December 31, 2021 $ Beginning Balance, 1/1/21 Add: Net Income for 2021 Less: Cash Dividends Paid Out Ending Balance, 12/31/21 43,067 78,312 (15,000) 106,379 $ Compute Company, Inc Income Statement For the Year Ended December 31, 2021 $ $ 582,196 6,800 34,000 41,950 484 3,250 9,800 678,480 32,200 36,230 200 4,485 487 5,605 20,925 3,678 12,450 8,500 Gross Receipts Form Services Rendered Dividends from domestic Corporations* Gain from Sale of Investment Land Gain from Sale of Securities Gain from Casualty Loss on Printer Interest on U.S. Treasury Notes Other Interest Income Total Income Accounting and Legal Expense Advertising Amortization Auto Expense Bank Service Charges Charitable Contributions Depreciation Employee Fringe Benefits Employee Pension Plan Entertainment (All for restaurant meals) Insurance (including $4,025 of key officers life insurance premiums Where Compute Company, Inc. pays the premiums and is the the beneficiary of the policy) Interest Maintenance Contract on Copier Office Supplies Payroll Taxes (Includes penalties for late filing of payroll returns of $1,200) Professional Dues Professional Subscriptions Property Taxes Rentals Expense Repairs Travel and Lodging Utilities Wages (including officers wages) Total Expenses and Losses Net Income Before Federal Income Tax Expense Minus: Federal Income Tax Expense Net Income 43,672 22,153 1,465 20,5221 17,450 1,650 3,800 12,670 16,825 1,436 9,980| 32,785 275,000 584,168 94,312 (16,000) 78,312 $ $ $ * Compute Company, Inc. owns less than 10% of the stock of all investee corporations. ADDITIONAL INFORMATION 1. During 2021, Compute sold the following securities: Expense No. Date Shares Company 150CEL Corp. 10/10/20 45 MAG Corp. 110YUK Corp. 11/18/20 Cost Acquired $ 65 2/15/21 95 Date Share 2/5/21 30 8/7/21 Price Selling Sold Share $330 $160 9/8/21 205 48 125 220 The purchaser of the CEL Corporation stock could not pay cash for the purchase of the stock. Therefore, Compute agreed to take a $9,500 downpayment (received in 2021) and four equal annual installments of $10,000. The first $10,000 installment is due October 10, 2022. Interest on the unpaid balance is paid at an 11% annual rate. The sale price represented the market value of the stock on the sale date. CEL Corporation stock is traded on the New York Stock Exchange. These sales were reported on Form 1099 and the basis was reported to the IRS. 2. On 2/20/21 lightning struck Compute's office building and destroyed its printer (Printer No. 1 on the depreciation schedule). The printer was insured against such losses and the insurance company paid Compute $850 for the loss of the printer. On March 1, 2021, Compute purchased a new printer to replace the old one for $2,800 (Printer No. 2 on the depreciation schedule). 3. On 10/31/21, Compute sold some land it had originally purchased as an investment to Florida Mini-Farms, a real estate developer. Compute had purchased the land on 11/15/19 for $12,000. Compute made a $2,000 downpayment to the original seller with a $10,000 mortgage to be repaid on 11/21/2019. Interest on the original $10,000 mortgage was payable at a 10% rate, with $833 interest paid in 2021. Property taxes of $1,200 are paid annually on the land and Compute deducted the proper prorated tax amount of $999 to arrive at 2021's net income. Florida Mini-Farms did not have enough cash to pay the total sales price of $46,000, so it made a $12,000 downpayment, assumed the original $10,000 mortgage and agreed to pay the balance of $24,000 in 4 equal installments, the first payment due 11/1/2015. Interest on the unpaid balance to Compute is 11% annually. 4. On 1/19/21, Compute sold on of its computers (Computer No. 2 on the depreciation schedule). The computer was sold to one of Compute's clients for $11,900 (Compute's book basis in the computer). 5. Mr. Peters, Compute's President, has asked us to prepare Compute's 2021 corporate tax return. Mr. Peters has asked that taxable income be reduced as much as possible by using any available accelerated capital recovery methods or other available tax reducing options. The basic ACRS and MACRS rules have been used for tax purposes for all asset acquisitions. Compute has never elected to use Section 179 expensing of assets or "bonus" depreciation and does not want to elect it this year. 6. All Compute's "listed property" is used 100% for business purposes, and Compute has written evidence to support the business use claimed. Compute has a written policy prohibiting all personal use of its vehicles by its employees. The delivery van and the 2019 Mustang are used by Compute's employees only for business purposes, such as driving to a client's office, etc. The two vehicles are parked every night in Compute's garage and no employee used the vehicles for commuting from office to home, and the vehicles are not available for any personal use during off-duty hours. Both vehicles are used only by employees other than Peters and Smith who both have other personally owned vehicles for their use. ASSIGNMENT: Complete the required tax return from for Compute Company Inc.'s 2021 corporate state and federal tax returns. Round your computations to the nearest dollar. Clearly state any assumptions made in completing the return. Include any supporting schedules you feel are necessary (but not depreciation schedules). When submitting the forms, please place in sequence according to the appropriate order (see attachment sequence number on the forms). Place all supporting statements at the end of the return. You will need the following forms: 1120, Schedule D, Schedule G, 1125-E, 8949, 4684 (page 2 only), 6252, 4797, 4562. Suggestions: You should enter prior year depreciation (both book and tax) on the asset entry screen. This will help with the M-1 adjustments and the gain calculations. You will likely have to do a little research on some of the items in this tax return that you are unfamiliar with The IRS website is a good place to start. Be careful about googling tax information. You can get good information but you must watch your sources. Information is often outdated and/or wrong so be sure you are referencing legitimate websites. The Excel spreadsheet is not required it is for your use to help you reconcile your M-1. Remember that in this software, if your balance sheet is out of balance, the problem is probably that your M-1 is out of balance. If you are having trouble with your M-1, try printing the return (required forms) and the Excel spreadsheet. Go through your return and enter the numbers from the return in the tax column on that spreadsheet. When you are done, the bottom line in the tax column should equal the number on line 28 on page 1 of the Form 1120. Then compare the book to the tax column and your required M-1 adjustments become evident in that middle column. If you are still having trouble, feel free to see me for assistance. COMPUTE COMPANY, INC. (A C-CORPORATION) Compute Company, Inc., is a consulting firm, which assists educational organizations in developing their computer software programs. Compute's address is 4001 N.W. 42nd Street, Gainesville, FL 32601, its telephone number is 352-989-8621, and its employer identification number is 38-1506984. Compute's Business Activity Code No. is 541519. The company was incorporated in Florida and started business on February 2, 2019. Matthew Peters and Margaret Smith (not related in any way) started the business with a cash investment of $100 per share. Matthew purchased 1,200 (60%) shares of common stock and Margaret purchased 800 (40%) shares of common stock. There has been no change in the stockholdings since incorporation. Both Matthew and Margaret devote 100% of their time to the business. Matthew is President and Secretary of the company and Margaret is Vice-President and Treasurer. Compute Company does not allow any expense accounts; however, properly substantiated expenses are reimbursed. Both officers are U.S. citizens. Other pertinent information about the company's activities is summarized below: 1. Compute has always used a calendar year-end. 2. The cash method of accounting was adopted in the initial tax year and has been continuously used 3. Dividends of $15,000 were paid to the stockholders on December 15, 2021. This was the first dividend paid in corporate history. 4. All state and federal estimated tax payments were made by year-end. Federal estimated tax payments made in 2021 were: April 15, 2021 CK No. 364 June 15, 2021 CK No. 583 September 15, 2021 CK No. 847 December 15, 2021 CK No. 1046 $4,000 $4,000 $4,000 $4,000 5. The corporation was not a grantor to a foreign trust, nor does the corporation maintain a foreign bank account or foreign security account. 6. The corporation's retained earnings balance is approximately the same as its E&P balance. 7. Annual gross receipts for the two preceding taxable years was: 2019 - $257,500; 2020 - $473,000. 8. No net operating loss, capital loss, general business credit or other carryovers to 2021 exist. 9. Compute made the appropriate election in 2019 to amortize organization costs. 10. Any overpayments of taxes are to be credited against next year's federal tax liability. 11. All employees, including the officers, receive fringe benefits of group term life insurance, accident and health insurance, and a qualified pension plan. Compute is not a member of a controlled group. 12. 13. Addresses and compensation of the officers are: Matthew Peters, S.S. No., 416-78-9209 4608 N.W. 42nd Avenue Gainesville, FL 32608 2021 Compensation - $84,000 Margaret Smith, S. S. No., 239-36-0824 312 S. E. 12th Street Gainesville, FL 32602 2021 Compensation - $76,000 Schedule of 2021 Book Depreciation Property Cost Method Life 30 Yr. 5 Xr 5 Yr Building 2019 Honda Delivery Van Furniture Computer #1 Computer #2 Computer #3 Printer #1 Printer #2 Date Acquired 2/10/19 3/01/19 7/22/20 2/16/19 2/05/19 7/01/19 4/08/21 2/05/19 3/01/21 $120,000 14,500 18,400 6,000 28,000 17,000 22,000 1,200 2,800 S/L S/L S/L S/L S/L S/L S/L S/L S/L 10 Yr. 5 Yr 5 Yr. 5 Yr. 3 Yr. 3 Yr. Prior Yrs. Allowance S 7,667 5,317 1,533 1,100 10,733 5,100 -0- 767 -0- Current Provision $ 4,000 2,900 3,680 600 5,600 -0- 3,300 67 778 Total $229,900 $32,217 $20.925 Compute Company, Inc. Balance Sheet For January 1, 2021 and December 31,2021 ASSETS Balance 1/1/2021 Balance 12/31/2021 Cash $ $ 34,212 40,000 62,600 U.S. Treasury Notes Marketable Securities Land Held for Investment Fixed Assets Minus: Accumulated Depreciation Organization Costs Minus: Amortization Land 6,489) 20,000 38,500 12,000 205,100 (32,217) 1,000 (400) 68,000 211,700 (47,208) 1,000 (600) 68,000 Total $ 318,472 $ 369,704 LIABILITIES AND EQUITY $ $ Notes Payable-Current Maturities Notes Payable-Noncurrent Maturities Mortgage Payable-Current Maturities Mortgage Payable-Noncurrent Maturities Capital Stock Retained Earnings 2,735 14,630 1,890 56,150 200,000 43.067 2,460 11,050 2,250 47,565 200,000 106,379 Total $ 318,472 $ 369,704 Compute Company, Inc. Statement of Retained Earnings December 31, 2021 $ Beginning Balance, 1/1/21 Add: Net Income for 2021 Less: Cash Dividends Paid Out Ending Balance, 12/31/21 43,067 78,312 (15,000) 106,379 $ Compute Company, Inc Income Statement For the Year Ended December 31, 2021 $ $ 582,196 6,800 34,000 41,950 484 3,250 9,800 678,480 32,200 36,230 200 4,485 487 5,605 20,925 3,678 12,450 8,500 Gross Receipts Form Services Rendered Dividends from domestic Corporations* Gain from Sale of Investment Land Gain from Sale of Securities Gain from Casualty Loss on Printer Interest on U.S. Treasury Notes Other Interest Income Total Income Accounting and Legal Expense Advertising Amortization Auto Expense Bank Service Charges Charitable Contributions Depreciation Employee Fringe Benefits Employee Pension Plan Entertainment (All for restaurant meals) Insurance (including $4,025 of key officers life insurance premiums Where Compute Company, Inc. pays the premiums and is the the beneficiary of the policy) Interest Maintenance Contract on Copier Office Supplies Payroll Taxes (Includes penalties for late filing of payroll returns of $1,200) Professional Dues Professional Subscriptions Property Taxes Rentals Expense Repairs Travel and Lodging Utilities Wages (including officers wages) Total Expenses and Losses Net Income Before Federal Income Tax Expense Minus: Federal Income Tax Expense Net Income 43,672 22,153 1,465 20,5221 17,450 1,650 3,800 12,670 16,825 1,436 9,980| 32,785 275,000 584,168 94,312 (16,000) 78,312 $ $ $ * Compute Company, Inc. owns less than 10% of the stock of all investee corporations. ADDITIONAL INFORMATION 1. During 2021, Compute sold the following securities: Expense No. Date Shares Company 150CEL Corp. 10/10/20 45 MAG Corp. 110YUK Corp. 11/18/20 Cost Acquired $ 65 2/15/21 95 Date Share 2/5/21 30 8/7/21 Price Selling Sold Share $330 $160 9/8/21 205 48 125 220 The purchaser of the CEL Corporation stock could not pay cash for the purchase of the stock. Therefore, Compute agreed to take a $9,500 downpayment (received in 2021) and four equal annual installments of $10,000. The first $10,000 installment is due October 10, 2022. Interest on the unpaid balance is paid at an 11% annual rate. The sale price represented the market value of the stock on the sale date. CEL Corporation stock is traded on the New York Stock Exchange. These sales were reported on Form 1099 and the basis was reported to the IRS. 2. On 2/20/21 lightning struck Compute's office building and destroyed its printer (Printer No. 1 on the depreciation schedule). The printer was insured against such losses and the insurance company paid Compute $850 for the loss of the printer. On March 1, 2021, Compute purchased a new printer to replace the old one for $2,800 (Printer No. 2 on the depreciation schedule). 3. On 10/31/21, Compute sold some land it had originally purchased as an investment to Florida Mini-Farms, a real estate developer. Compute had purchased the land on 11/15/19 for $12,000. Compute made a $2,000 downpayment to the original seller with a $10,000 mortgage to be repaid on 11/21/2019. Interest on the original $10,000 mortgage was payable at a 10% rate, with $833 interest paid in 2021. Property taxes of $1,200 are paid annually on the land and Compute deducted the proper prorated tax amount of $999 to arrive at 2021's net income. Florida Mini-Farms did not have enough cash to pay the total sales price of $46,000, so it made a $12,000 downpayment, assumed the original $10,000 mortgage and agreed to pay the balance of $24,000 in 4 equal installments, the first payment due 11/1/2015. Interest on the unpaid balance to Compute is 11% annually. 4. On 1/19/21, Compute sold on of its computers (Computer No. 2 on the depreciation schedule). The computer was sold to one of Compute's clients for $11,900 (Compute's book basis in the computer). 5. Mr. Peters, Compute's President, has asked us to prepare Compute's 2021 corporate tax return. Mr. Peters has asked that taxable income be reduced as much as possible by using any available accelerated capital recovery methods or other available tax reducing options. The basic ACRS and MACRS rules have been used for tax purposes for all asset acquisitions. Compute has never elected to use Section 179 expensing of assets or "bonus" depreciation and does not want to elect it this year. 6. All Compute's "listed property" is used 100% for business purposes, and Compute has written evidence to support the business use claimed. Compute has a written policy prohibiting all personal use of its vehicles by its employees. The delivery van and the 2019 Mustang are used by Compute's employees only for business purposes, such as driving to a client's office, etc. The two vehicles are parked every night in Compute's garage and no employee used the vehicles for commuting from office to home, and the vehicles are not available for any personal use during off-duty hours. Both vehicles are used only by employees other than Peters and Smith who both have other personally owned vehicles for their use. ASSIGNMENT: Complete the required tax return from for Compute Company Inc.'s 2021 corporate state and federal tax returns. Round your computations to the nearest dollar. Clearly state any assumptions made in completing the return. Include any supporting schedules you feel are necessary (but not depreciation schedules). When submitting the forms, please place in sequence according to the appropriate order (see attachment sequence number on the forms). Place all supporting statements at the end of the return. You will need the following forms: 1120, Schedule D, Schedule G, 1125-E, 8949, 4684 (page 2 only), 6252, 4797, 4562. Suggestions: You should enter prior year depreciation (both book and tax) on the asset entry screen. This will help with the M-1 adjustments and the gain calculations. You will likely have to do a little research on some of the items in this tax return that you are unfamiliar with The IRS website is a good place to start. Be careful about googling tax information. You can get good information but you must watch your sources. Information is often outdated and/or wrong so be sure you are referencing legitimate websites. The Excel spreadsheet is not required it is for your use to help you reconcile your M-1. Remember that in this software, if your balance sheet is out of balance, the problem is probably that your M-1 is out of balance. If you are having trouble with your M-1, try printing the return (required forms) and the Excel spreadsheet. Go through your return and enter the numbers from the return in the tax column on that spreadsheet. When you are done, the bottom line in the tax column should equal the number on line 28 on page 1 of the Form 1120. Then compare the book to the tax column and your required M-1 adjustments become evident in that middle column. If you are still having trouble, feel free to see me for assistance