Note: This problem is for the 2023 tax year. On December 1, 2022 was formed Ernie Corporation, to sell clothing and party supplies for kids. Pertinent information regarding Your Company is summarized as follows: e Count von Count Corporation's business address is 1010 15t Ave, Northwest Seattle WA 98117; its telephone number is (214) 555-3341; and its e-mail address is bigbirdcorp@gmail.com. The employer identification number is 92-8118913, and the principal business activity code is 453910. * Paul and Owen each own 50% of the common stock; Paul is president and Owen is vice president of the company. No other class of stock is authorized. e Both Paul and Owen are full-time employees of the Company. You do not need to disclose their SSN. e The Corporation is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Corporation uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes. e During 2023, the corporation distributed cash dividends of $250,000. Corporation's financial statements for 2023 are shown below. Income Statement Income Gross sales $4,750,000 Sales returns and allowances (200,000) Net sales $5,550,000 Cost of goods sold (2,300,000) Gross profit $2,250,000 Dividends received from stock investments in less- than-20%- owned U.S. corporations 43,750 Interest income: State bonds $15,000 Certificates of deposit Total income $2,328,750 Expenses Salariesofficers: Paul Morton $562,500 Owen Wong 162,500 $725,000 Salariesclerical and sales 725,000 Taxes (state, local, and payroll) Repairs and maintenance 140,000 Interest expense: Loan to purchase state bonds $9,000 Other business loans 207,000 216,000 Advertising 58,000 Rental expense 309,000 Depreciation* 106,000 Charitable contributions 38,000 (cash) Employee benefit programs 60,000 Premiums on term life insurance 20,000 35,000 238,000 policies on executives Total expenses (2,715,000) Net income before taxes -$386,250 Federal income tax (0) Net income per books -$386,250 100,000 * Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). Balance Sheet Assets January 1, 2023 December 31, 2023 Cash $1,200,000 $1,039,461 Trade notes and accounts receivable 2,062,500 2,157,000 Inventories 2,750,000 3,030,000 Stock investment 1,125,000 1,225,000 State bonds 375,000 275,000 Certificates of deposit 400,000 400,000 Prepaid Federal tax -0- 2,266 Buildings and other depreciable assets 5,455,000 5,455,000 Accumulated depreciation (606,000) (712,000) Land 812,500 812,500 Other assets 140,000 118,500 Total assets $13,714,000 $13,802,727 Liabilities and Equity December 31, 2023 Accounts payable $2,284,000 $1,840,711 Other current liabilities 175,000 255,000 Mortgages 4,625,000 4,475,000 Capital stock 2,500,000 2,500,000 Retained earnings 4,130,000 4,732,016 Total liabilities and equity $13,714,000 $13,802,727 Required: During 2023, The Corporation made estimated tax payments of $0 each quarter to the IRS. Prepare your Company's corporate tax return for tax year 2023 using Form 1120 (and any other appropriate forms and schedules). e If an amount box does not require an entry or the answer is zero, enter "0". e Enter all amounts as positive numbers, unless otherwise instructed. s If required, round amounts to the nearest dollar. e Make realistic assumptions about any missing data U.S. Corporation Income Tax Return For calendar year 2023 or tax year beginning , 2023, ending Go to www.irs.gov/Form1120 for instructions and the latest information. Name . 1120 Department of the Treasury Internal Revenue Service A Checkif: 1a Consolidated return (attach Form 851) Ernie Corporation OMB No. 1545-0123 2023 B Employer identification number 92-8118913 b Lifeonlife consoli- dated return . Personal holding co. Number, street, and room or suite no. If a P.O. box, see instructions. 1010 15th Ave, Northwest C Date incorporated (attach Sch. PH) . Personal service corp. (see instructions) . Schedule M-3 attached City or town, state or province, country, and ZIP or foreign postal code Final return @ Name change 4 D Total assets (see instructions) $ Address change 13,802,727 Gross receipts or sales . 4,750,000 b Returns and allowances . . Balance. Subtract line 1b from line 1a . 1c 4,550,000 2 Cost of goods sold (attach Form 1125-A) . 2 -2,300,000 3 Gross profit. Subtract line 2 from line 1c . 3 2,250,000 E 4 Dividends and inclusions (Schedule C, line 23) 4 43,750 8| 5 Interest 5 20,000 6 Grossrents 6 0 7 Gross royalties i 7 0 8 Capital gain net income (attach Schedule D (Form 1120)) 8 0 9 Net gain or (loss) from Form 4797, Part |1, line 17 (attach Form 4797) 9 0 10 Other income (see instructionsattach statement) . 10 0 11 Total income. Add lines 3 through 10 . 4 11 2,313,750 T 12 Compensation of officers (see instructions attach Form 1125- E) 12 725,000 S | 13 Salaries and wages (less employment credits) 13 725,000 14 Repairs and maintenance 14 140,000 B | 156 Baddebts . 15 0 T 116 Rents . 16 309,000 3 17 Taxes and licenses 17 238,000 _ 18 Interest (see instructions) 18 216,000 8| 19 Charitable contributions . W OB W G B OB % W B W e B OF % H B N 19 38,000 -_E_ 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) . 20 136,000 S| 21 Depletion 21 0 2|22 Advertising s w & 22 58,000 '% 23 Pension, profit-sharing, etc., plans 23 0 % 24 Employee benefit programs . 24 60,000 | 25 Energy efficient commercial bwldlngs deduction (attach Form ?205} 25 0 & 26 Other deductions (attach statement) 26 100,000 o | 27 Total deductions. Add lines 12 through 26 S oW m OB B % E e & 8 & B M 3 g e 27 2,745,000 E 28 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11. 28 (431,250) 2 | 29a Net operating loss deduction (see instructions) 29a 0 % | b Special deductions (Schedule G, line 24) . [ 20b | 21,875 = Add lines 29a and 28b 29c 0 7 30 Taxable income. Subtract line 29 from line 28. See instructions 30 (453,125) ;. 31 Total tax (Schedule J, Part |, line 11) 31 0 B .| 32 Reserved for future use . 32 g% 33 Total payments and credits (Schedule J, Part I, line 23) 5 33 0 34 Estimated tax penalty. See instructions. Check if Form 2220 is attached 34 0 2 35 Amount owed. If line 33 is smaller than the total of lines 31 and 34, enter amount owed . 35 0 ;' 36 Overpayment. If line 33 is larger than the total of lines 31 and 34, enter amount overpaid W oHE g 36 0 " | 37 Enter amount from line 36 you want: Credited to 2024 estimated tax Refunded | 37 0 Under penalties of perjury, | declare that | have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is rue, correct, and S' complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Ign May the IRS discuss this return with the preparer shown below? Here - g See instructions. [ | Yes No Signature of officer Date Title = Print/T reparer's name Preparer's signature Date PTIN Paid ype prep P g Chock it self-employed Preparer Py Use Only Firm's name Firm's EIN Firm's address Phone no. For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11450Q Form 1120 (2023 Form 1120 (2023) Page 3 Schedule JI Tax Computation and Payment (see instructions Part I-Tax Computation Income tax. See instructions . Base erosion minimum tax amount (attach Form 8991) . lol A W N - Corporate alternative minimum tax from Form 4626, Part II, line 13 (attach Form 4626). Add lines 1, 2, and 3 . 5a Foreign tax credit (attach Form 1118) . 5a b Credit from Form 8834 (see instructions) 5b General business credit (see instructions -attach Form 3800) . 5c ooo o O d Credit for prior year minimum tax (attach Form 8827) 5d Bond credits from Form 8912 . 5e Total credits. Add lines 5a through 5e CO O Subtract line 6 from line 4 Personal holding company tax (attach Schedule PH (Form 1120)) . ga Recapture of investment credit (attach Form 4255) . 9a oo b Recapture of low-income housing credit (attach Form 8611) C Interest due under the look-back method-completed long-term contracts (attach Form 8697) . 9c d Interest due under the look-back method-income forecast method (attach Form 8866) 9d e Alternative tax on qualifying shipping activities (attach Form 8902) ge o o o o o O Interest/tax due under section 453A(c) . 9f g Interest/tax due under section 453(1) 9g Other (see instructions- attach statement) 10 Total. Add lines 9a through 9z . 10 11 Total tax. Add lines 7, 8, and 10. Enter here and on page 1, line 31 11 lol Part II-Payments and Refundable Credits 12 Reserved for future use 12 13 Preceding year's overpayment credited to the current year . 13 14 Current year's estimated tax payments 14 15 Current year's refund applied for on Form 4466 15 loglol 16 Combine lines 13, 14, and 15 16 17 Tax deposited with Form 7004 17 18 Withholding (see instructions) 18 19 Total payments. Add lines 16, 17, and 18. 19 20 Refundable credits from: a Form 2439 . 20a b Form 4136 . 20b C Reserved for future use 20c Z Other (attach statement-see instructions) 20z 21 Total credits. Add lines 20a through 20z 21 22 Elective payment election amount from Form 3800 22 lol 23 Total payments and credits. Add lines 19, 21, and 22. Enter here and on page 1, line 33. 23 Form 1120 (2023)Form 1120 (2023) Page 6 Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets (a) (b) (c) (d) Cash ,200,00 1,039,461 a Trade notes and accounts receivable 2,062,500 2, 157,000 b Less allowance for bad debts 2,062,500 2, 157,000 Inventories . 2,750,000 3,030,000 U.S. government obligations Tax-exempt securities (see instructions) 375,000 275,000 Other current assets (attach statement) 400,000 400,000 Loans to shareholders Mortgage and real estate loans . Other investments (attach statement) 1,125,000 1,225,000 10a Buildings and other depreciable assets 5,455,000 5,455,000 b Less accumulated depreciation . 606,000) 4,849,000 712000) ,743,000 11a Depletable assets . b Less accumulated depletion . 12 Land (net of any amortization) 812,500 812,500 13a Intangible assets (amortizable only) b Less accumulated amortization . 14 Other assets (attach statement) . 140,000 120,766 15 Total assets 13,714,000 13,802,727 Liabilities and Shareholders' Equity 16 Accounts payable . 2,284,000 1,840,711 Mortgages, notes, bonds payable in less than 1 year Other current liabilities (attach statement) . 175,000 255,000 Loans from shareholders . 20 Mortgages, notes, bonds payable in 1 year or more 4,625,000 4,475,000 21 Other liabilities (attach statement) 22 Capital stock: a Preferred stock b Common stock 2,500,000 2,500,000 2,500,000 2,500,000 Additional paid-in capital . 24 Retained earnings-Appropriated (attach statement) 25 Retained earnings-Unappropriated 4,130,00 4,732,016 26 Adjustments to shareholders' equity (attach statement) 27 Less cost of treasury stock . 28 Total liabilities and shareholders' equity 13,714,000 13,802,727 Schedule M-1 |Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. Net income (loss) per books . (386,250) 7 Income recorded on books this year Federal income tax per books not included on this return (itemize): AWN = Excess of capital losses over capital gains Tax-exempt interest $ 15,000 Income subject to tax not recorded on books this year (itemize): 15,000 Deductions on this return not charged 5 Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): a Depreciation $ 30,000 a Depreciation $ b Charitable contributions $ b Charitable contributions . 38,000 C Travel and entertainment . $ 30,000 St Bond Int Exp 9,000; Life Ins Prem 100,000 109,000 9 Add lines 7 and 8 . 45,000 6 Add lines 1 through 5. 239,256) 10 Income (page 1, line 28)-line 6 less line 9 (284,256) Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Schedule L, Line 25) Balance at beginning of year 4,130,000 Distributions: a Cash . 250,000 Net income (loss) per books . (386,250) b Stock W N Other increases (itemize): c Property . 6 Other decreases (itemize): Add lines 5 and 6 . 250,000 Add lines 1, 2, and 3 Balance at end of year (line 4 less line 7) 3,993,750 Form 1120 (2023)