Facts in 2018:

• ABCInc. 777 Oak Dr Houston TX 77002.
• EIN-74-1234567.
• Date Incorporated 1/1/2000.
• Total Assets $5,390,000 as of 12/31/2018.
• Business Activity Code is 448140 and business activity and product is a retail trade of family clothing (Hint - Schedule K.)

• ABC Inc.'s Net Income per books is $440,000 (Hint - Schedule M-1)
• Gross Receipts $1,200,000
• Cost of Goods Sold $600,000 (assume no beginning and ending inventory and purchases were $600,000) (Hint - Form 1125-A)
• ABC Inc. received $20,000 in interest income from US Treasury Notes during 2018.
• ABC Inc. uses the lower of cost or market method for valuing inventory and also uses the FIFO method for determining the cost of goods sold.Cash method of accounting is used for all other expenses other than inventory.

• Compensation paid to sole shareholder, John Doe. SSN-222-22-2222 was $200,000.
• Salaries and wages paid to employees were $60,000.
• Office Rent paid for corporate headquarters was $20,000.
• ABC Inc. contributed $60,000 to the Salvation Army, a non-profit charitable organization. (Hint - See Charitable Contributions in Chapter 16.The contribution may be limited.If the deduction is limited, an entry is required on Schedule M-1.)
• Television advertising to promote the company products was $40,000.

• ABC Inc. elected to carry over $7,500 of overpaid taxes from 2017 to 2018 (Hint - Schedule J Part III).
• ABCClothing Inc. paid $22,000 foreachof the 4 quarters for estimated tax payments in 2018 (Hint - Schedule J Part III).

• ABC Inc. owns 10% of Better Inc., EIN:74-3333333, a domestic corporation, and received dividends in the amount of $100,000 in 2018. (Hint - The dividends will be reported on Form 1120 and the Dividend Deduction on Schedule C)
• ABC Inc. owns 40% of Best Inc., EIN:74-4444444, a domestic corporation, and received dividends in the amount of $100,000 in 2018.(Hint - The dividends will be reported on Form 1120 and the Dividend Deduction on Schedule C)

• ABC Inc. is a calendar year taxpayer and not affiliated with any other entity.
• No dividends were declared or paid by ABC Clothing Inc.
• No Forms 1099-Misc were required to be issued.
• ABC Inc. has always shown a profit since inception.

• Balance Sheet Per Books information follows:

Assets:

1/1/2018

12/31/2018

Cash

$250,000

$590,000

Treasury Notes

$1.200,000

$1,200,000

Prepaid Income Tax

$0

$100,000

Better Inc. Investment

$200,000

$200,000

Best Inc. Investment

$800,000

$800,000

Land

$2,500,000

$2,500,000

Total assets

$4,950,000

$5,390,000

Liabilities and Shareholders' Equity:

Capital Stock ($100 par, 1,000 shares issued & outstanding)

$100,000

$100,000

Retained Earnings

$4,850,000

$5,290,000

Total liabilities and shareholders' equity

$4,950,000

$5,390,000

Instructions-

ABC Inc has engaged you to prepare the2018 Form 1120.You are encouraged to use Tax ACT to prepare the Form 1120 for ABC Inc.Tax ACT is located in "Student Resources" in the assignment section of Connect.You will need to download "Tax ACT Form 1120 Installer".Module 3 has instructions on how to download Tax Act.If you are prompted to enter any identification numbers, please create a number anddo not use your Social Security Number.You do not need to put your SSN # on the Form 1120.If you have a Mac computer, Tax ACT may not be compatible, and you will need to prepare the return on tax forms.The tax forms can be located at irs.gov.