Overview You are a senior tax accountant in the firm, Ernest Rainhouse Joe, a new junior accountant, has just prepared his first corporate tax return for Zeus, Inc The electronic filing system has rejected the Zeus, Inc 's Form 1120 U S Corporation Income Tax Return 2020 PDF due to errors and omissions Joe is seeking your help in determining his mistakes and in answering some corporate tax questions he is unsure about You are to read the scenario below and then follow the instructions Scenario Zeus, Inc is organized as a corporation and is taxed as a C corporation with a calendar year end Zeus, Inc owns and operates an amusement park in Los Angeles, California Zeus, Inc s address, employer identification number (EIN), and date of incorporation are as follows Zeus, Inc 77 Sunset Strip Los Angeles, CA 90028 EIN 56 1234567 Date incorporated July 1, 2010 Zeus, Inc is owned by 77 shareholders No person or entity owns directly 20 or more, or owns, directly or indirectly, more than 50 of the voting stock of Zeus, Inc No one is from outside of the United States Zeus, Inc uses the accrual method of accounting Zeus, Inc is not audited by a CPA firm It does, however, use GAAP based financial statements and has never had a restatement of its income statement Zeus, Inc reported the following information for 2020 Zeus, Inc made payments that required it to file federal form(s) 1099 The 1099s were filed timely Zeus, Inc average annual gross receipts for the prior three years are under $26,000,000 Zeus, Inc elects to file a complete Schedule M 3 even if only M 1, or a partial M 3, is required Additional Information Used in the Preparation of Zeus, Inc Financial Statements On August 1, 2020, Zeus, Inc was notified by its legal counsel that Zeus, Inc was being sued by a former employee regarding her termination of employment from Zeus, Inc On December 21, 2020, a legal settlement was reached with this terminated employee As part of the settlement, Zeus agreed to pay the employee a settlement amount of $190,000 on January 10, 2021 Zeus, Inc accrued this expense on its 2020 financial statements Zeus, Inc owns 12 of Fun Fair of Russia, a Russian corporation operating a theme park on the outskirts of Moscow Fun Fair of Russia remitted dividends to Zeus, Inc of $14,000 Zeus, Inc also received $300 in dividends from holding marketable securities (all less than 20 owned by Zeus, Inc ) From inception until this year, Zip Coaster has been Zeuss main attraction, but it aged and lost appeal Zeus, Inc purchased a new attraction known as the Swirlwind The Swirlwind was installed and placed in operation on March 1, 2020, at a cost of $6,000,000 to acquire and place into service Zeus, Inc rents its amusement equipment from vendors As of December 31, 2019, and December 31, 2020, respectively, Zeus, Inc has prepaid vendors for equipment rental of $30,000 for January 2020 and $35,000 for January 2021 On December 26, 2020, Zeus, Inc prepaid a contractor $17,500 to repair three pieces of maintenance shop equipment Zeus, Inc fully expects that the contractor will have completed the project by January 31, 2020 As of December 31, 2019, and 2020, respectively, Zeus, Inc had vacation accruals on its books of $29,000 and $35,000 On December 2, 2020, Zeus, Inc held an advertising give away of $100,000 Zeus, Inc rents part of their unused land Zeus, Inc received a check for $50,000 on December 27, 2020, for 6 months rental beginning January 1, 2021 The lease contains a clause that the rent is nonrefundable to the renter under any circumstances During the year, Zeus, Inc made the following estimated tax payments DateFederal Estimated Tax PaymentCalifornia Estimated Tax Payment4 15 2020$72,500$15,0006 15 2020$72,500$15,0009 15 2020$72,500$15,00012 15 2020$72,500$15,000 On December 1, 2020, Zeus Inc paid $400,000 dividends to all common stockholders Additional Information Used in the Preparation of Zeus, Inc Corporate Tax Return Zeus, Inc maintains a portfolio of tax exempt securities and publicly traded stocks as a measure to provide immediate liquidity if needed All of these securities originate from less than 20 owned domestic corporations Zeus, Inc paid an attorney $10,000 in obtaining the tax exempt securities Zeuss regular tax depreciation for the year is correctly calculated as $1,112,499 (from previous years purchases) before considering the 2020 addition of the Swirlwind Because of the Swirlwinds modular design, it is considered personal property (Not real property ) Near the end of the year, Zeus, Inc switched its property and casualty insurance company As a result, the plan year for its insurance contract was altered On December 31, 2020, Zeus, Inc prepaid insurance premiums of $25,000 representing coverage through February 15, 2021, as a condition of being accepted by the new company Zeus, Inc did not expense any of the prepayments for financial accounting purposes Zeus, Inc 's officer information for the year is as follows (Compensation amounts included in total wages on the income statement for all employees ) NameSocial Security of Time Devoted to Business of Stock OwnedAmount of CompensationMargo Harrington123 45 6789100 05 $235,000Dean Williams987 65 4321100 03 $195,000Dennis Johns456 78 9321100 0 $165,000Jamie Conway321 45 6978100 0 $150,000 All the accrued wages and bonus amounts on the financial statements as of December 31, 2019, were paid on February 28, 2020 The winner of the advertising give away of $100,000 was presented the check on January 15, 2021 As of March 15, 2020, and 2021, respectively Zeus, Inc had paid $5,000 and $8,000 of the vacation accrued amounts Zeus, Inc Financial Statements Zeus, Inc Balance SheetAs of Dec 31, 2019As of Dec 31, 2020Assets Cash165,000119,000Accounts Receivable128,00075,000Less Allowance for Doubtful Accounts(43,000)(49,000)Inventory422,000390,000Tax exempt Securities150,000150,000Publicly Traded Stocks200,000200,000Fixed Assets24,000,00028,000,000Less Accumulated Depreciation(13,542,000)(12,892,000)Prepaid Insurance 25,000Prepaid Rent30,00035,000 Prepaid Contractors 17,500Other Assets150,000250,000Total Assets 11,660,000 16,320,500 Liabilities Stockholders' Equity Accounts Payable48,00062,000Accrued Wages123,000118,000Accrued Bonuses68,50039,000Accrued Vacation29,00035,000Legal Settlement Accrual 190,000Prize Accrual 100,000Unearned Rental Revenue 50,000Notes Payable Short Term1,540,0001,084,000Notes Payable Long Term7,112,00011,728,000 Capital Stock100,000100,000Additional Paid in Capital2,000,0002,000,000Retained Earnings639,500814,500Total Liabilities Stockholders' Equity 11,660,000 16,320,500 Zeus, Inc Income Statement For the Year Ended December 31, 2020 Income Sales 26,523,275Less Sales Returns Allowances (113,500) Net Sales 26,409,775Cost of Goods Sold (2,052,500)Gross Margin 24,357,275Other Income Dividend Income 14,300 Interest Income 2,650 Municipal Bond Interest Income 2,30019,250Total Income 24,376,525 Expenses Employee Salaries 13,905,600Repairs Maintenance 492,350Bad Debts 58,000Rent 1,543,000Payroll Taxes 1,112,400Licensing Fees 10,750Property Taxes 277,000Interest Expense 781,000Depreciation 1,350,000Office Supplies 33,950Employee Training 53,750Safety Expenses 31,000Political Contribution 2,500CA Safety Commission Fine 5,000Advertising 290,500Admission Supplies 143,250Attorney Fees 10,000Meals Entertainment 8,500Travel 13,550Insurance 215,000Legal Settlement 190,000Prize Contest Expense 100,000Fuel 158,675Utilities 2,530,500Telephone 135,250 Total Expenses Before Taxes 23,451,525 CA Income Tax Expense60,000 Federal Tax Expense290,000 Total Income Taxes 350,000 Net Income 575,000 Instructions Write 3 5 page paper in which you do the following Identify at least three errors or omissions on the Zeus, Inc 's Form 1120 U S Corporation Income Tax Return 2020 PDF , justifying selections with IRS codes, IRS regulations, court cases, or FASB statements Explain the criteria that requires the use of M 3 and describe how it is more beneficial to the financial statement user Explain at least two IRS approved methods available to Zeus Inc to make estimated tax payments, explaining and justifying the preferred method Explain the relationship of a corporations tax year and their financial reporting year, explaining at least two complications Provide how to mitigate the two complications that might arise in preparing Zeus Incs income tax provision for the financial statements Use at least two quality sources to support your writing Choose sources that are credible, relevant, and appropriate Cite each source listed on your source page at least one time within your assignment Writing contains accurate grammar, mechanics, and spelling in accordance with SWS style

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Overview You are a senior tax accountant in the firm, Ernest & Rainhouse. Joe, a new junior accountant, has just prepared his first corporate tax

Overview

You are a senior tax accountant in the firm, Ernest & Rainhouse. Joe, a new junior accountant, has just prepared his first corporate tax return for Zeus, Inc. The electronic filing system has rejected the Zeus, Inc.'s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF] due to errors and omissions. Joe is seeking your help in determining his mistakes and in answering some corporate tax questions he is unsure about. You are to read the scenario below and then follow the instructions.

Scenario

Zeus, Inc. is organized as a corporation and is taxed as a C corporation with a calendar year end. Zeus, Inc. owns and operates an amusement park in Los Angeles, California. Zeus, Inc.s address, employer identification number (EIN), and date of incorporation are as follows:

Zeus, Inc.
- 77 Sunset Strip.
- Los Angeles, CA 90028.
EIN: 56-1234567.
Date incorporated: July 1, 2010.

Zeus, Inc. is owned by 77 shareholders. No person or entity owns directly 20% or more, or owns, directly or indirectly, more than 50% of the voting stock of Zeus, Inc. No one is from outside of the United States.

Zeus, Inc. uses the accrual method of accounting. Zeus, Inc. is not audited by a CPA firm. It does, however, use GAAP-based financial statements and has never had a restatement of its income statement.

Zeus, Inc. reported the following information for 2020:

Zeus, Inc. made payments that required it to file federal form(s) 1099. The 1099s were filed timely.
Zeus, Inc. average annual gross receipts for the prior three years are under $26,000,000.
Zeus, Inc. elects to file a complete Schedule M-3 even if only M-1, or a partial M-3, is required.

Additional Information Used in the Preparation of Zeus, Inc. Financial Statements:

On August 1, 2020, Zeus, Inc. was notified by its legal counsel that Zeus, Inc. was being sued by a former employee regarding her termination of employment from Zeus, Inc. On December 21, 2020, a legal settlement was reached with this terminated employee. As part of the settlement, Zeus agreed to pay the employee a settlement amount of $190,000 on January 10, 2021. Zeus, Inc. accrued this expense on its 2020 financial statements.
Zeus, Inc. owns 12% of Fun Fair of Russia, a Russian corporation operating a theme park on the outskirts of Moscow. Fun Fair of Russia remitted dividends to Zeus, Inc. of $14,000. Zeus, Inc. also received $300 in dividends from holding marketable securities (all less than 20% owned by Zeus, Inc.).
From inception until this year, Zip Coaster has been Zeuss main attraction, but it aged and lost appeal. Zeus, Inc. purchased a new attraction known as the Swirlwind. The Swirlwind was installed and placed in operation on March 1, 2020, at a cost of $6,000,000 to acquire and place into service.
Zeus, Inc. rents its amusement equipment from vendors. As of December 31, 2019, and December 31, 2020, respectively, Zeus, Inc. has prepaid vendors for equipment rental of $30,000 for January 2020 and $35,000 for January 2021.
On December 26, 2020, Zeus, Inc. prepaid a contractor $17,500 to repair three pieces of maintenance shop equipment. Zeus, Inc. fully expects that the contractor will have completed the project by January 31, 2020.
As of December 31, 2019, and 2020, respectively, Zeus, Inc. had vacation accruals on its books of $29,000 and $35,000.
On December 2, 2020, Zeus, Inc. held an advertising give-away of $100,000.
Zeus, Inc. rents part of their unused land. Zeus, Inc. received a check for $50,000 on December 27, 2020, for 6-months rental beginning January 1, 2021. The lease contains a clause that the rent is nonrefundable to the renter under any circumstances.
During the year, Zeus, Inc. made the following estimated tax payments:

DateFederal Estimated Tax PaymentCalifornia Estimated Tax Payment4/15/2020$72,500$15,0006/15/2020$72,500$15,0009/15/2020$72,500$15,00012/15/2020$72,500$15,000

On December 1, 2020, Zeus Inc. paid $400,000 dividends to all common stockholders.

Additional Information Used in the Preparation of Zeus, Inc. Corporate Tax Return:

Zeus, Inc. maintains a portfolio of tax-exempt securities and publicly traded stocks as a measure to provide immediate liquidity if needed. All of these securities originate from less than 20% owned domestic corporations. Zeus, Inc. paid an attorney $10,000 in obtaining the tax-exempt securities.
Zeuss regular tax depreciation for the year is correctly calculated as $1,112,499 (from previous years purchases) before considering the 2020 addition of the Swirlwind. Because of the Swirlwinds modular design, it is considered personal property. (Not real property.)
Near the end of the year, Zeus, Inc. switched its property and casualty insurance company. As a result, the plan year for its insurance contract was altered. On December 31, 2020, Zeus, Inc. prepaid insurance premiums of $25,000 representing coverage through February 15, 2021, as a condition of being accepted by the new company. Zeus, Inc. did not expense any of the prepayments for financial accounting purposes.

Zeus, Inc.'s officer information for the year is as follows: (Compensation amounts included in total wages on the income statement for all employees.)

NameSocial Security #% of Time Devoted to Business% of Stock OwnedAmount of CompensationMargo Harrington123-45-6789100%.05%$235,000Dean Williams987-65-4321100%.03%$195,000Dennis Johns456-78-9321100%0%$165,000Jamie Conway321-45-6978100%0%$150,000

All the accrued wages and bonus amounts on the financial statements as of December 31, 2019, were paid on February 28, 2020.
The winner of the advertising give-away of $100,000 was presented the check on January 15, 2021.
As of March 15, 2020, and 2021, respectively Zeus, Inc. had paid $5,000 and $8,000 of the vacation accrued amounts.

Zeus, Inc. Financial Statements:

Zeus, Inc. Balance SheetAs of Dec. 31, 2019As of Dec. 31, 2020Assets: Cash165,000119,000Accounts Receivable128,00075,000Less: Allowance for Doubtful Accounts(43,000)(49,000)Inventory422,000390,000Tax-exempt Securities150,000150,000Publicly Traded Stocks200,000200,000Fixed Assets24,000,00028,000,000Less: Accumulated Depreciation(13,542,000)(12,892,000)Prepaid Insurance 25,000Prepaid Rent30,00035,000Prepaid Contractors 17,500Other Assets150,000250,000Total Assets11,660,00016,320,500 Liabilities & Stockholders' Equity: Accounts Payable48,00062,000Accrued Wages123,000118,000Accrued Bonuses68,50039,000Accrued Vacation29,00035,000Legal Settlement Accrual-190,000Prize Accrual-100,000Unearned Rental Revenue-50,000Notes Payable - Short Term1,540,0001,084,000Notes Payable - Long Term7,112,00011,728,000 Capital Stock100,000100,000Additional Paid-in Capital2,000,0002,000,000Retained Earnings639,500814,500Total Liabilities & Stockholders' Equity11,660,00016,320,500Zeus, Inc. Income Statement For the Year Ended December 31, 2020 Income: Sales 26,523,275Less: Sales Returns & Allowances (113,500) Net Sales 26,409,775Cost of Goods Sold (2,052,500)Gross Margin 24,357,275Other Income: Dividend Income14,300 Interest Income2,650 Municipal Bond Interest Income2,30019,250Total Income: 24,376,525 Expenses: Employee Salaries 13,905,600Repairs & Maintenance 492,350Bad Debts 58,000Rent 1,543,000Payroll Taxes 1,112,400Licensing Fees 10,750Property Taxes 277,000Interest Expense 781,000Depreciation 1,350,000Office Supplies 33,950Employee Training 53,750Safety Expenses 31,000Political Contribution 2,500CA Safety Commission Fine 5,000Advertising 290,500Admission Supplies 143,250Attorney Fees 10,000Meals & Entertainment 8,500Travel 13,550Insurance 215,000Legal Settlement 190,000Prize Contest Expense 100,000Fuel 158,675Utilities 2,530,500Telephone 135,250 Total Expenses Before Taxes 23,451,525 CA Income Tax Expense60,000 Federal Tax Expense290,000 Total Income Taxes 350,000Net Income: 575,000

Instructions

Write 3-5 page paper in which you do the following:

Identify at least three errors or omissions on the Zeus, Inc.'s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF], justifying selections with IRS codes, IRS regulations, court cases, or FASB statements.
Explain the criteria that requires the use of M-3 and describe how it is more beneficial to the financial statement user.
Explain at least two IRS approved methods available to Zeus Inc. to make estimated tax payments, explaining and justifying the preferred method.
Explain the relationship of a corporations tax year and their financial reporting year, explaining at least two complications. Provide how to mitigate the two complications that might arise in preparing Zeus Incs income tax provision for the financial statements.
Use at least two quality sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.
Writing contains accurate grammar, mechanics, and spelling in accordance with SWS style.