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Income Statement for the period ending December 31, 2022 and delivered to NFS on about June 30, 2023. - NFS prepaid an insurance premium of $21,000 in September. The new policy is effective October 1, 2022 through September 30, 2023. - NFS's regular tax depreciation for the year is correctly calculated as $350,000 before considering the current year fixed asset additions of $840,000 (see table below). NFS wants to claim the fastest recovery method(s) possible on these asset additions without electing any $179 expensing. - NFS acquired the following new fixed assets from unrelated parties in 2021: - NFS reports employee compensation amounts that remained unpaid at year-end in Accrued Bonuses, Accrued Vacation and Accrued Wages on the balance sheet, as applicable. The table below provides a summary of the balances in these accounts for December 31, 2021 and 2022. Supplementary Details (continued): - NFS has never issued publicly offered debt instruments. - NFS is not required to file a Schedule UTP, Uncertain Tax Position Statement. - NFS made several payments during the current year that were required to be reported on Forms 1099-NEC; all required Forms 1099 were filed timely by NFS. - NFS has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax-deferred transaction. - NFS did not receive any assets in Section 351 transfers during the year. - NFSs average annual gross receipts have never exceeded $26 million annually. Northern Food Services, Inc. Financial Statements (kept on a GAAP basis): Mark Ghirardelli 160 West 57th Avenue New York City, NY 10027 SSN-448-26-4917 Shares owned 1,500 100% of time devoted to the business, compensation of $120,000 NFS follows the accrual method of accounting (GAAP) and is not a member of any consolidated or affiliated group of entities. NFS is not audited by a CPA firm and has never had to restate its financial statement information. Supplementary Details: - The dividends received by NFS during the year were paid by Apple, Inc. (NFS owns less than 20% of Apple, Inc.'s stock). - NFS had its sole municipal bond (New York City) redeemed (bought back) in the current year. NFS originally purchased the New York City bonds on February 1, 2018 for $100,000 (no premium or discount paid). The bond was redeemed by New York City on February 1, 2022 for $100,000. Both tax basis and proceeds received on this transaction were reported to NFS on a Form 1099-B. - NFS purchased 200 shares of Apple, Inc. on October 10, 2018 for $100,000 (including commission). On July 10, of the current year, NFS sold the 200 shares of Apple, Inc. for $350 a share (including commission). Both tax basis and proceeds received on this transaction were reported to NFS on a form 1099-B. - During the year, NFS contributed $8,000 to the American Lung Association. - On December 10, NFS paid Madison Advertising $27,500 to design a new catering advertisement campaign for next year. This money represented half of the total $55,000 contract price. NFS expects that the services will be provided and delivered to NFS on about June 30, 2023. Northern Food Services, Inc. Financial Statements (kept on a GAAP basis): Supplementary Details (continued): - On November 1, a large insurance company paid NFS a $100,000 deposit to reserve catering event services on March 18, 2023 at the insurance company's annual meeting in New York City. The deposit is fully refundable until January 15, 2023. Thereafter, half of the deposit becomes non-refundable. - Meal expenses were incurred for clients and NFS staff at important meetings where business was conducted. NFS did not incur any entertainment-related expenses in 2022. - NFS values its inventory at cost and has always used the specific identification method for reporting purposes. The company has never written down any inventory for any reason and the rules of Section 263A (UNICAP) do not apply to NFS. - NFS made the following estimated Federal income tax payments: April 15th 2022:$2,000 September 15 5th,2022:$2,000 June 15 5th,2022:$2,000 December 15 5th,2022:$1,000 - If applicable, NFS wants any overpayment refunded. Miscellaneous Information: - NFS did not make any dividend distributions or distributions in excess of current and accumulated earnings and profits during the current year. - NFS does not have any net operating loss carryforward amounts available for the current year. - NFS has never issued publicly offered debt instruments. - NFS is not required to file a Schedule UTP, Uncertain Tax Position Statement. - NFS made several payments during the current year that were required to be reported on Forms 1099-NEC; all required Forms 1099 were filed timely by Instructions: Please complete Northern Food Services, Inc.'s 2022 Form 1120, U.S. Corporation Income Tax Return, based upon the information provided below. If required information is missing, use reasonable assumptions to fill in the gaps. Submit your return and the "Workpaper" excel file with the book-tax reconciliation. Feel free to add tabs that show additional calculations. Northern Food Services, Inc. (NFS) is organized in the state of New York as a corporation and is taxed as a "C" corporation with a calendar year-end. NFS operates a delicatessen/bakery in New York City, NY that specializes in mobile food catering for events and gatherings within the tri-state area. NFS's address (unchanged since inception), employer identification number (EIN), and date of incorporation are as follows: Northern Food Services, Inc. 257 West 55th Avenue New York City, NY 10027 EIN: 143283459 Date of Incorporation: March 17, 2015 NFS's address has not changed since its inception. NFS has been rapidly expanding its catering business. This expansion has required a significant amount of new equipment purchases. NFS sold some of its liquid investments in order to avoid having to take on debt to fund these purchases. Further, NFS invested heavily in its catering business by significantly increasing its advertising budget. NFS and its officers expect that revenue increases from these expenditures will begin next year. Municipal Bond Interest Income Capital Loss-Shares of Apple, Inc. Total Income: Expenses: Employee Salaries Repairs and Maintenance Bad Debts Rent Payroll Taxes Licensing Fees Property Taxes Interest Expense Depreciation Office Supplies Employee Training Employee Benefits Charitable Contribution Advertising Meals (100\% deductible) Travel Insurance Utilities Telephone Federal income tax expense/(benefit) Total Expenses: Net Income (Loss): 1,400(30,000) 2,764,000 743,500 19,000 44,000 230,000 60,000 4,500 12,500 140,000 278,500 5,400 3,600 24,000 9,700 70,000 1,700 600 19,750 142,000 14,500 21,910 1,845,160 $918,840 NFS is owned by four related shareholders from the same family for the entire year: Johnny Ghirardelli (father) and his three children Michelle, Maria, and Mark. None of NFS's shareholders are non-U.S. persons. There are currently 10,000 shares of NFS common stock issued and outstanding (NFS has never issued preferred stock). The shareholders are also employees of NFS and its only corporate officers. The relevant shareholder and officer information for the current year is provided below. Officer compensation is included in Employee Salaries on the income statement. Their personal information is provided below: Johnny Ghirardelli 160 West 57th Avenue New York City, NY 10027 SSN: 149874342 Shares owned 5,500 100% of time devoted to the business, compensation of $150,000 Michelle Ghirardelli Costa 250 South Main Hoboken, New Jersey 07030 SSN: 981-58-4581 Shares owned 1,500 100% of time devoted to the business, compensation of $130,000 Maria Ghirardelli 65 East 55th Avenue New York City, NY 10027 SSN: 182-84-2222 Shares owned 1,500 100% of time devoted to the business, compensation of $130,000 Mark Ghirardelli \begin{tabular}{|c|c|c|c|c|c|} \hline 1 & Northern Food Services, Inc. & & & & \\ \hline 2 & 12/31/22 & & & & \\ \hline 3 & Book-Tax Reconciliation & & & & \\ \hline 4 & \multirow[b]{2}{*}{ Description } & Book Income & \multicolumn{2}{|c|}{ Book-Tax Adjustments } & Taxable Income \\ \hline 5 & & (Dr)/Cr & (Dr) & Cr & (Dr)/Cr \\ \hline 6 & Revenue from sales & 3,925,000 & & & 3,925,000 \\ \hline 7 & Less: Returns & (8,500) & & & (8,500) \\ \hline 8 & Less: Cost of goods sold & (1,129,850) & & & (1,129,850) \\ \hline 9 & Gross profit & 2,786,650 & & & 2,786,650 \\ \hline 10 & Other Income: & & & & \\ \hline 11 & Dividend income & 2,800 & & & 2,800 \\ \hline 12 & Interest income-Bank & 150 & & & \\ \hline 13 & Interest Income-US Treasury & 3,000 & & & \\ \hline 14 & Municipal bond interest income & 1,400 & 1,400 & & - \\ \hline 15 & Loss on sale of Apple, Inc. stock & (30,000) & & & \\ \hline 16 & Total Income & 2,764,000 & & & \\ \hline 17 & Expenses: & & & & \\ \hline 18 & Employee salaries & (743,500) & & & (743,500) \\ \hline 19 & Employee salaries (Accrued Wages) & - & & & \\ \hline 20 & Employee salaries (Accrued Bonuses) & - & & & \\ \hline 21 & Employee salaries (Accrued Vacation) & - & & & \\ \hline 22 & Repairs and maintenance & (19,000) & & & (19,000) \\ \hline 23 & Bad debts & (44,000) & & & \\ \hline 24 & Rent & (230,000) & & & \\ \hline 25 & Payroll taxes & (60,000) & & & \\ \hline 26 & Licensing fees & (4,500) & & & \\ \hline 27 & Property taxes & (12,500) & & & \\ \hline 28 & Interest expense & (140,000) & & & \\ \hline 29 & Depreciation & (278,500) & & & \\ \hline 30 & Office supplies & (5,400) & & & \\ \hline 31 & Employee training & (3,600) & & & \\ \hline 32 & Employee benefits & (24,000) & & & \\ \hline 33 & Charitable contribution (down below) & - & & & \\ \hline 34 & Advertising & (70,000) & & & \\ \hline 35 & Meals & (1,700) & & & \\ \hline 36 & Travel & (600) & & & \\ \hline 37 & Insurance & (19,750) & & & \\ \hline 38 & Utilities & (142,000) & & & \\ \hline 39 & Telephone & (14,500) & & & \\ \hline 40 & Federal tax (expense)/benefit & (21,910) & & & \\ \hline 41 & Total expenses before DRD/NOL/Charitable & (1,835,460) & & & \\ \hline 42 & & & & & \\ \hline 43 & Taxable income before DRD/NOL/Charitable & 928,540 & & & \\ \hline 44 & & & & & \\ \hline 45 & Taxable income for charitable purposes & & & & \\ \hline 46 & & & & & \\ \hline 47 & Charitable contribution & (9,700) & & & \\ \hline 48 & & & & & \\ \hline 49 & Taxable income before DRD & & & & \\ \hline 50 & & & & & \\ \hline 51 & Dividends received deduction (DRD) & - & & & \\ \hline 52 & & & & & \\ \hline 53 & Book/taxable income (loss) & 918,840 & & & \\ \hline 54 & & & & & \\ \hline 55 & & & & & \\ \hline 56 & & & & & \\ \hline 57 & & & & & \\ \hline 58 & & & & & \\ \hline & Book-Tax Reco & + & & & \\ \hline \end{tabular} Income Statement for the period ending December 31, 2022 and delivered to NFS on about June 30, 2023. - NFS prepaid an insurance premium of $21,000 in September. The new policy is effective October 1, 2022 through September 30, 2023. - NFS's regular tax depreciation for the year is correctly calculated as $350,000 before considering the current year fixed asset additions of $840,000 (see table below). NFS wants to claim the fastest recovery method(s) possible on these asset additions without electing any $179 expensing. - NFS acquired the following new fixed assets from unrelated parties in 2021: - NFS reports employee compensation amounts that remained unpaid at year-end in Accrued Bonuses, Accrued Vacation and Accrued Wages on the balance sheet, as applicable. The table below provides a summary of the balances in these accounts for December 31, 2021 and 2022. Supplementary Details (continued): - NFS has never issued publicly offered debt instruments. - NFS is not required to file a Schedule UTP, Uncertain Tax Position Statement. - NFS made several payments during the current year that were required to be reported on Forms 1099-NEC; all required Forms 1099 were filed timely by NFS. - NFS has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax-deferred transaction. - NFS did not receive any assets in Section 351 transfers during the year. - NFSs average annual gross receipts have never exceeded $26 million annually. Northern Food Services, Inc. Financial Statements (kept on a GAAP basis): Mark Ghirardelli 160 West 57th Avenue New York City, NY 10027 SSN-448-26-4917 Shares owned 1,500 100% of time devoted to the business, compensation of $120,000 NFS follows the accrual method of accounting (GAAP) and is not a member of any consolidated or affiliated group of entities. NFS is not audited by a CPA firm and has never had to restate its financial statement information. Supplementary Details: - The dividends received by NFS during the year were paid by Apple, Inc. (NFS owns less than 20% of Apple, Inc.'s stock). - NFS had its sole municipal bond (New York City) redeemed (bought back) in the current year. NFS originally purchased the New York City bonds on February 1, 2018 for $100,000 (no premium or discount paid). The bond was redeemed by New York City on February 1, 2022 for $100,000. Both tax basis and proceeds received on this transaction were reported to NFS on a Form 1099-B. - NFS purchased 200 shares of Apple, Inc. on October 10, 2018 for $100,000 (including commission). On July 10, of the current year, NFS sold the 200 shares of Apple, Inc. for $350 a share (including commission). Both tax basis and proceeds received on this transaction were reported to NFS on a form 1099-B. - During the year, NFS contributed $8,000 to the American Lung Association. - On December 10, NFS paid Madison Advertising $27,500 to design a new catering advertisement campaign for next year. This money represented half of the total $55,000 contract price. NFS expects that the services will be provided and delivered to NFS on about June 30, 2023. Northern Food Services, Inc. Financial Statements (kept on a GAAP basis): Supplementary Details (continued): - On November 1, a large insurance company paid NFS a $100,000 deposit to reserve catering event services on March 18, 2023 at the insurance company's annual meeting in New York City. The deposit is fully refundable until January 15, 2023. Thereafter, half of the deposit becomes non-refundable. - Meal expenses were incurred for clients and NFS staff at important meetings where business was conducted. NFS did not incur any entertainment-related expenses in 2022. - NFS values its inventory at cost and has always used the specific identification method for reporting purposes. The company has never written down any inventory for any reason and the rules of Section 263A (UNICAP) do not apply to NFS. - NFS made the following estimated Federal income tax payments: April 15th 2022:$2,000 September 15 5th,2022:$2,000 June 15 5th,2022:$2,000 December 15 5th,2022:$1,000 - If applicable, NFS wants any overpayment refunded. Miscellaneous Information: - NFS did not make any dividend distributions or distributions in excess of current and accumulated earnings and profits during the current year. - NFS does not have any net operating loss carryforward amounts available for the current year. - NFS has never issued publicly offered debt instruments. - NFS is not required to file a Schedule UTP, Uncertain Tax Position Statement. - NFS made several payments during the current year that were required to be reported on Forms 1099-NEC; all required Forms 1099 were filed timely by Instructions: Please complete Northern Food Services, Inc.'s 2022 Form 1120, U.S. Corporation Income Tax Return, based upon the information provided below. If required information is missing, use reasonable assumptions to fill in the gaps. Submit your return and the "Workpaper" excel file with the book-tax reconciliation. Feel free to add tabs that show additional calculations. Northern Food Services, Inc. (NFS) is organized in the state of New York as a corporation and is taxed as a "C" corporation with a calendar year-end. NFS operates a delicatessen/bakery in New York City, NY that specializes in mobile food catering for events and gatherings within the tri-state area. NFS's address (unchanged since inception), employer identification number (EIN), and date of incorporation are as follows: Northern Food Services, Inc. 257 West 55th Avenue New York City, NY 10027 EIN: 143283459 Date of Incorporation: March 17, 2015 NFS's address has not changed since its inception. NFS has been rapidly expanding its catering business. This expansion has required a significant amount of new equipment purchases. NFS sold some of its liquid investments in order to avoid having to take on debt to fund these purchases. Further, NFS invested heavily in its catering business by significantly increasing its advertising budget. NFS and its officers expect that revenue increases from these expenditures will begin next year. Municipal Bond Interest Income Capital Loss-Shares of Apple, Inc. Total Income: Expenses: Employee Salaries Repairs and Maintenance Bad Debts Rent Payroll Taxes Licensing Fees Property Taxes Interest Expense Depreciation Office Supplies Employee Training Employee Benefits Charitable Contribution Advertising Meals (100\% deductible) Travel Insurance Utilities Telephone Federal income tax expense/(benefit) Total Expenses: Net Income (Loss): 1,400(30,000) 2,764,000 743,500 19,000 44,000 230,000 60,000 4,500 12,500 140,000 278,500 5,400 3,600 24,000 9,700 70,000 1,700 600 19,750 142,000 14,500 21,910 1,845,160 $918,840 NFS is owned by four related shareholders from the same family for the entire year: Johnny Ghirardelli (father) and his three children Michelle, Maria, and Mark. None of NFS's shareholders are non-U.S. persons. There are currently 10,000 shares of NFS common stock issued and outstanding (NFS has never issued preferred stock). The shareholders are also employees of NFS and its only corporate officers. The relevant shareholder and officer information for the current year is provided below. Officer compensation is included in Employee Salaries on the income statement. Their personal information is provided below: Johnny Ghirardelli 160 West 57th Avenue New York City, NY 10027 SSN: 149874342 Shares owned 5,500 100% of time devoted to the business, compensation of $150,000 Michelle Ghirardelli Costa 250 South Main Hoboken, New Jersey 07030 SSN: 981-58-4581 Shares owned 1,500 100% of time devoted to the business, compensation of $130,000 Maria Ghirardelli 65 East 55th Avenue New York City, NY 10027 SSN: 182-84-2222 Shares owned 1,500 100% of time devoted to the business, compensation of $130,000 Mark Ghirardelli \begin{tabular}{|c|c|c|c|c|c|} \hline 1 & Northern Food Services, Inc. & & & & \\ \hline 2 & 12/31/22 & & & & \\ \hline 3 & Book-Tax Reconciliation & & & & \\ \hline 4 & \multirow[b]{2}{*}{ Description } & Book Income & \multicolumn{2}{|c|}{ Book-Tax Adjustments } & Taxable Income \\ \hline 5 & & (Dr)/Cr & (Dr) & Cr & (Dr)/Cr \\ \hline 6 & Revenue from sales & 3,925,000 & & & 3,925,000 \\ \hline 7 & Less: Returns & (8,500) & & & (8,500) \\ \hline 8 & Less: Cost of goods sold & (1,129,850) & & & (1,129,850) \\ \hline 9 & Gross profit & 2,786,650 & & & 2,786,650 \\ \hline 10 & Other Income: & & & & \\ \hline 11 & Dividend income & 2,800 & & & 2,800 \\ \hline 12 & Interest income-Bank & 150 & & & \\ \hline 13 & Interest Income-US Treasury & 3,000 & & & \\ \hline 14 & Municipal bond interest income & 1,400 & 1,400 & & - \\ \hline 15 & Loss on sale of Apple, Inc. stock & (30,000) & & & \\ \hline 16 & Total Income & 2,764,000 & & & \\ \hline 17 & Expenses: & & & & \\ \hline 18 & Employee salaries & (743,500) & & & (743,500) \\ \hline 19 & Employee salaries (Accrued Wages) & - & & & \\ \hline 20 & Employee salaries (Accrued Bonuses) & - & & & \\ \hline 21 & Employee salaries (Accrued Vacation) & - & & & \\ \hline 22 & Repairs and maintenance & (19,000) & & & (19,000) \\ \hline 23 & Bad debts & (44,000) & & & \\ \hline 24 & Rent & (230,000) & & & \\ \hline 25 & Payroll taxes & (60,000) & & & \\ \hline 26 & Licensing fees & (4,500) & & & \\ \hline 27 & Property taxes & (12,500) & & & \\ \hline 28 & Interest expense & (140,000) & & & \\ \hline 29 & Depreciation & (278,500) & & & \\ \hline 30 & Office supplies & (5,400) & & & \\ \hline 31 & Employee training & (3,600) & & & \\ \hline 32 & Employee benefits & (24,000) & & & \\ \hline 33 & Charitable contribution (down below) & - & & & \\ \hline 34 & Advertising & (70,000) & & & \\ \hline 35 & Meals & (1,700) & & & \\ \hline 36 & Travel & (600) & & & \\ \hline 37 & Insurance & (19,750) & & & \\ \hline 38 & Utilities & (142,000) & & & \\ \hline 39 & Telephone & (14,500) & & & \\ \hline 40 & Federal tax (expense)/benefit & (21,910) & & & \\ \hline 41 & Total expenses before DRD/NOL/Charitable & (1,835,460) & & & \\ \hline 42 & & & & & \\ \hline 43 & Taxable income before DRD/NOL/Charitable & 928,540 & & & \\ \hline 44 & & & & & \\ \hline 45 & Taxable income for charitable purposes & & & & \\ \hline 46 & & & & & \\ \hline 47 & Charitable contribution & (9,700) & & & \\ \hline 48 & & & & & \\ \hline 49 & Taxable income before DRD & & & & \\ \hline 50 & & & & & \\ \hline 51 & Dividends received deduction (DRD) & - & & & \\ \hline 52 & & & & & \\ \hline 53 & Book/taxable income (loss) & 918,840 & & & \\ \hline 54 & & & & & \\ \hline 55 & & & & & \\ \hline 56 & & & & & \\ \hline 57 & & & & & \\ \hline 58 & & & & & \\ \hline & Book-Tax Reco & + & & & \\ \hline \end{tabular}