Part A: Following are the before-tax financial accounting income statement and balance sheet for Snap- It-Open Corporation as of December 31, 2013

Part B: Complete a Form 1120 and Form 4562 for Snap-It-Open Corporation

Snap-It-Open Corporation Income Statement

For the Year Ending December 31, 2013

Sales Revenue		$1,935,000
Cost of Goods Sold (1)		428,000
Gross Profit on Sales Expenses:		$1,507,000
Salaries and Wages	$186,000
FICA/FUTA (2)	25,698
Rent	240,000
Repairs and Maintenance	20,000
Utilities	80,000
Taxes and Licenses (excluding FICA and FUTA taxes)	10,000
Health Insurance	16,000
Advertising	40,000
Travel (excluding meals)	20,000
Meals and Entertainment	15,000
Group Term Life Insurance	2,000
Depreciation (3)	100,000
Interest Expense	57,500
Bad Debt Expense (4) Total Expenses	38,700	850,898
Net Income Before Tax		$656,102

(1) Cost of Goods Sold:

Beginning Inventory	0
+ Purchases	$360,000
- Purchase Returns	(5,000)
- Ending Inventory	(33,000)
+ Factory Salaries	106,000
Cost of Goods	$428,000

(2) FICA = $292,000 x .0765 = $22,338 FUTA = 8 x $7,000 x .06 = 3,360

Total $25,698

(3) Depreciation: ($500,000 x .10) + ($400,000 x .125) = $100,000

Taxation for Decision Makers Tax Return Problem Solutions

(4) Bad Debt Expense: .02 x $1,935,000 = $38,700

Snap-It-Open Corporation Balance Sheet

December 31, 2013

Current Assets:

Cash Accounts Receivable	$755,000	$374,302
Less: Allowance for Bad Debts	38,700	716,300
Tax Deposits		40,000
Inventory		33,000
Total Current Assets Long-Term Assets: Machinery	$900,000	$1,163,602
Less: Accumulated Depreciation	100,000	$800,000
Total Assets		$1,963,602

Current Liabilities:
Interest Payable	$ 57,500
Current Portion of Long-term Note Payable	100,000
Total Current Liabilities	$157,500
Long-term Liabilities
Note Payable	650,000
Total Liabilities	$807,500

Stockholder Equity: Common Stock	$100,000
Paid-in Capital	400,000
Retained Earnings	656,102	1,156,102
Total Liabilities and Equities		$1,963,602