Fenway Enterprises, Inc.

Public on NASDAQ

Financial Statements 12/31/2022

Gross Sales 100,000,000

Sales and Returns (1,500,000)

Net Sales 98,500,000

Cost of Good Sold (35,000,000)

Gross Profit 63,500,000

Dividends- 10% owed US Corp 800,000

Dividends XXX Stock owed in Corp own 25% 1,500,000

Gain on Sale of XYZ shares 100,000

Interest Income

City of Irvine Muni Bonds 250,000

CDs 150,000

Checking Account 100,000

US Treasuries 100,000

Total Income 66,400,000

Salaries CEO 4,500,000

Salaries CFO 1,500,000

Salaries COO 2,500,000

Bad Debts 2,000,000

Other Salaries and Wages 7,500,000

Taxes-State and Local all deductible 950,000

Repairs and Maintenance 140,000

Legal Contingency (not paid) 6,500,000

Interest Expense:

Loan to purchase Irvine Bonds 250,000

Line of Credit 650,000

Research and Development Expenses 1,500,000

Travel 250,000

Meals (non restaurant) 300,000

Entertainment 275,000

Warranty Expense (no claims in 2022) 280,000

Advertising 200,000

Lobbying Expenses 25,000

Book Depreciation* 600,000

Cash Charitable Contributions 100,000

Premiums on Life Insurance for Officers: 275,000

Loss- Trek Enterprises stock 350,000

Total Expenses 30,645,000

Net Income Before Taxes 35,755,000

Federal Taxes TBD

Net Income Per Books TBD *

Depreciation for Taxes is $1,550,000, of which $500,000 is Bonus Depreciation for current-year additions

	12/31/2021	12/31/2022
Cash	1,500,000	TBD
Accounts Receivable	2,500,000	7,500,000
Bad Debt Allowance	-	(2,000,000)
Inventories	45,000,000	60,000,000
Warranty Reserve		(280,000)
Stock Investment	-	30,000,000
Muni Bonds	-	12,500,000
CDs and Treasuries	-	10,000,000
Office Equipment	5,000,000	5,500,000
Accumulated Depreciation	(2,500,000)	(3,100,000)
Deferred Tax Asset		TBD
Other Assets	2,500,000	-
Total Assets	54,000,000	TBD
Accounts Payable **	5,000,000	8,500,000
Legal Settlement Reserve	-	6,500,000
Federal Tax Payable	-	10,475,850
Line Of Credit	4,000,000	8,000,000
Capital Stock	40,000,000	70,000,000
Retained Earnings	5,000,000	TBD
Total Liabilities and Equity	54,000,000	TBD
** Includes borrowing for Tax Exempt Bonds

On January 1, 2020, Fenway Enterprises, Inc., was formed to manufacture and sell Baseball Cards. In the current year 2022, the went Public and now is listed on the NASDAQ (Ticker Symbol FEIC) is summarized as follows:

Fenway Enterprises, Inc.'s business address is 1010 Irvine Blvd., Tustin CA 92782; its telephone number is (714) 505-2222.

The employer identification number is 11-1111112, and the principal business activity code is 423910.

Timothy Fenway and Michael Fenway each owned 10% of the common stock; Timothy is President and CEO, and Michael is COO of the company. Ryan Norway is the CFO and does not hold any shares.

All the officers are full-time employees of Fenway Enterprises, Inc. Timothy's Social Security number is 123-45-6788, Michael's Social Security number is 123-45-6787 and Ryan's Social Security Number is 123-95-7894.

The Company sold XXX Company stock at 12/31/2022 that was purchased on 1/02/2022 with IPO proceeds. They purchased 1,000 shares @ 130 per share and sold it @ $230 per share. The Company also has worthless stock in their portfolio. Trek Enterprises a private company that was purchased for $350,000 on January 1, 2022, and the Company filed for bankruptcy on September 30, 2022.

Fenway Enterprises, Inc. is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. No inventory reserves were recorded at 12/31/2022. Fenway Enterprises, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) but elected straight line for tax purposes. For 2021, first year of operations the Company claimed tax depreciation same as the amount for book purposes.

During 2022, the corporation distributed a total of $800,000 of dividends to all shareholders during 2022.

Fenway Enterprises, Inc.'s GAAP redacted summarized audited public financial statements for 2022 are shown in a separate file.

For 2022, the Company claimed deprecation on its Office Equipment for tax purposes for 2022 as noted in the facts in the separate file. You are provided enough detailed data to completed a Form 4562. The current year additions are $500,000 was claimed. No book tax differences in depreciation existed at 12/31/2021.

Fenway Enterprises, Inc. made all payments of $10,500,000 on January 15, 2023. Ignore any estimated tax penalties.

1.Explain a Federal Tax Provision and related tax accounts for financial statement purposes using excel model provided.

2. Calculate form 1120, 1125-A, E. SCH.D, 4562, SCH M-1, EXCEL TAX PROVISION.

3. Explain the relationship between the tax provision and related accounts and form 1120

4. Explain how you determined what is taxable, not taxable, deductible, or not deductible. Also, provide detail computations of your permanent and temporary differences and any other facts in the case. Provide the journal entries