Prepare form 1120 for Sunshine glasses Co. form and information attached below.
Sunshine Sunglasses, Inc. Federal Tax Return
FACTS
Sunshine Sunglasses Inc. is owned by Raymond J. Smith and his wife, Mary P. Smith. The corporation manufactures childrens sunglasses (business activity code number 339900). The corporation has reported positive financial and taxable incomes since inception. The company is located at 200 Sunshine Way, Boca Raton, Florida 33431. The company's employer identification number is 98-7654321, and the calendar year is used for tax purposes. The date of incorporation was February 9, 2008.
Raymond J. Smith (social security number 123-45-6789) is an 81 percent shareholder and president of the company. Mary P. Smith (social security number 111-11-1111) is a 19 percent shareholder and vice president of the company. Both persons devote 100 percent of their time to the corporation. Raymonds compensation is $187,154 per year, and Mary's compensation is $121,051 for the year.
The corporation is not a personal holding company. While the corporation is a 'closely-held C corporation,' it does not engage in activities to which the at-risk or passive activity loss limitations apply.
The corporation files its tax return on the accrual method. Inventory has been consistently valued at Cost under the FIFO method using the full absorption procedure. Inventory capitalization rules of Internal Revenue Code Section 263A do not apply due to the 'small business exception' (average annual gross receipts for the three preceding taxable years do not exceed $10 million). The accounting records are computerized.
ADDITIONAL INFORMATION 1 Sunshine Sunglasses, Inc. made estimated tax payments attributable to 2016 of S30,. The corporation also had a credit from an overpayment of its prior year Federal income taxes of S3,889 that it elected to apply against its 2016 tax liability. Apply any overpayment to 2017 2. Ignore state income taxes. 3. Dividend income is from the following sources: Big Time Fun (Sunshine owns 75% of all outstanding stock) IBM Corp.(owns 12% of all outstanding stock) Voltage, Inc. (owns 25% of all outstanding) S 7,578 3,120 17,001 27,699 Total 4. An analysis of the Allowance for Doubtful Accounts reveals: Balance, 01/01/16 2016 Transactions Provision for bad debts Recoveries of bad debts Accounts written off as uncollectible S38,111 4,554 (2,877) Balance, 12/31/16 $39,788 5. Goodwill of $28,425 arose on purchase of another business on 01/31/14. Amortization is not being taken for financial purposes. 6. Assume that deductios for tax depreciation (i.e., Modified Accelerated Cost Recovery) for the year total $120,787. For this practice set do not complete Form 4562 (Depreciation and Amortization) 7. $94,530 of the Accrued Wages as of 12/31/15 were paid by 3/15/16. $92,547 of the Accrued Wages as of 12/31/16 were paid by 3/15/17. The M-1 should be adjusted through the Wage Expense. 8. Contributions included: Salvation Army Committee to Elect Donald Trump, Presi Florida Food Bank $4,923 1,200 2.100 $8,223 dent Total All contributions were paid in cash during the year except for the Food Bank contribution which was pledged by the corporation i.e., approved by the Board of Directors) on December 27, 2016 and paid on March 4, 2017 9. Included in interest income is $1,050 from State of Florida General Obligation Bonds held throughout the current year. These bonds are included in the marketable securities account. ADDITIONAL INFORMATION 1 Sunshine Sunglasses, Inc. made estimated tax payments attributable to 2016 of S30,. The corporation also had a credit from an overpayment of its prior year Federal income taxes of S3,889 that it elected to apply against its 2016 tax liability. Apply any overpayment to 2017 2. Ignore state income taxes. 3. Dividend income is from the following sources: Big Time Fun (Sunshine owns 75% of all outstanding stock) IBM Corp.(owns 12% of all outstanding stock) Voltage, Inc. (owns 25% of all outstanding) S 7,578 3,120 17,001 27,699 Total 4. An analysis of the Allowance for Doubtful Accounts reveals: Balance, 01/01/16 2016 Transactions Provision for bad debts Recoveries of bad debts Accounts written off as uncollectible S38,111 4,554 (2,877) Balance, 12/31/16 $39,788 5. Goodwill of $28,425 arose on purchase of another business on 01/31/14. Amortization is not being taken for financial purposes. 6. Assume that deductios for tax depreciation (i.e., Modified Accelerated Cost Recovery) for the year total $120,787. For this practice set do not complete Form 4562 (Depreciation and Amortization) 7. $94,530 of the Accrued Wages as of 12/31/15 were paid by 3/15/16. $92,547 of the Accrued Wages as of 12/31/16 were paid by 3/15/17. The M-1 should be adjusted through the Wage Expense. 8. Contributions included: Salvation Army Committee to Elect Donald Trump, Presi Florida Food Bank $4,923 1,200 2.100 $8,223 dent Total All contributions were paid in cash during the year except for the Food Bank contribution which was pledged by the corporation i.e., approved by the Board of Directors) on December 27, 2016 and paid on March 4, 2017 9. Included in interest income is $1,050 from State of Florida General Obligation Bonds held throughout the current year. These bonds are included in the marketable securities account
