Part B: Complete a Form 1120 and Form 4562 for Snap-It-Open Corporation using the following additional information. The corporation wrote off no bad debts for the year and it maximized its cost recovery deductions on the four machines purchased. Use the latest available tax forms from the IRS Web site at www.irs.gov.

TRP 1 Corporate Tax Return Problem Solution Part A: Following are the before-tax financial accounting income statement and balance sheet for SnapIt-Open Corporation as of December 31, 2011 Snap-It-Open Corporation Income Statement For the Year Ending December 31, 2011 Sales Revenue Cost of Goods Sold (1) Gross Profit on Sales Expenses: Salaries and Wages FICA/FUTA (2) Rent Repairs and Maintenance Utilities Taxes and Licenses (excluding FICA and FUTA taxes) Health Insurance Advertising Travel (excluding meals) Meals and Entertainment Group Term Life Insurance Depreciation (3) Interest Expense Bad Debt Expense (4) Total Expenses Net Income Before Tax (1) Cost of Goods Sold: Beginning Inventory + Purchases - Purchase Returns - Ending Inventory + Factory Salaries Cost of Goods 0 $360,000 (5,000) (33,000) 106,000 $428,000 (2) FICA = $292,000 x .0765 = $22,338 FUTA = 8 x $7,000 x .060 = 3,360 Total $25,698 (3) Depreciation: ($500,000 x .10) + ($400,000 x .125) = $100,000 $1,535,000 428,000 $1,107,000 $186,000 25,698 240,000 20,000 80,000 10,000 16,000 40,000 20,000 15,000 2,000 100,000 57,500 30,700 842,898 $264,102 Taxation for Decision Makers Tax Return Problem Solutions (4) Bad Debt Expense: .02 x $1,535,000 = $30,700 Snap-It-Open Corporation Balance Sheet December 31, 2011 Current Assets: Cash Accounts Receivable Less: Allowance for Bad Debts Tax Deposits Inventory Total Current Assets Long-Term Assets: Machinery Less: Accumulated Depreciation Total Assets $374,302 $355,000 30,700 $900,000 100,000 Liabilities: Interest Payable Note Payable Total Liabilities Stockholder Equity: Common Stock Paid-in Capital Retained Earnings Total Liabilities and Equities 324,300 40,000 33,000 $771,602 $800,000 $1,571,602 $ 57,500 750,000 $807,500 $100,000 400,000 264,102 764,102 $1,571,602