"Required: Complete Blue catering Service Inc.'s (BCS) 2022 Form 1120 Schedule D, and Schedule G using the information provided below. Use the 21% flat corporate income tax rate to calculate tax liability. Assume that BCS does not owe any alternative minimum tax. If any information is missing, use reasonable assumptions to fill in the gaps. The forms, schedules, and instructions can be found at the IRS website (www.irs.gov). The instructions can be helpful in completing the forms. You need to turn in following through the Canvas online submission system: 1. Paper submission. Fill out Form 1120 (exclude Schedule K and M-2), Schedule D and Schedule G, which are posted under Files/Tax Return Project. Print them on paper and turn them in on Dec 4th (in class). 2. Online submission. You also need to use Excel to demonstrate your understanding of the calculation process and provide tax advice related to charitable contribution. Go to Canvas/Files/Tax Return Project and download the Tax Return Project Excel file. This is the file for you to build your work. The online submission is also due on Dec 4th. o In the BTD tab, please provide the calculation of book-tax differences using the format below: Item name Book Tax Difference Favorable/Unfavorable o In the Taxable income tab, provide the calculation of taxable corporate income in a way similar to the Form 1120 (line 1a-line 28). You need to reference line items to the book-tax difference worksheet (BTD tab) when applicable. o In the Charitable contribution tab, BCS is considering making a charitable contribution that will be fully deductible in the 2022 tax return. Please advise BCS the maximum amount of charitable contribution that will be fully deductible in 2022 and provide your calculation (you need to reference to numbers in the BTD and Taxable income tabs when applicable). You do not need to use the deduction to calculate a new taxable income.

Facts: Cara Gold, Janna Glints, and Val Cruz each own one-third of the common stock of Blue Catering Services Inc. (BCS). BCS was incorporated on February 4, 2011. It has only one class of stock outstanding and operates as a C corporation for tax purposes. BCS caters all types of social events throughout southern California. BCS is located at 540 Waverly Way, San Diego, CA 92101. BCS's Employer Identification Number is 38-4743474. BCS's business activity is catering food and services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: Cara is the chief executive officer and president (Social Security number 231-54-8976). Janna is the executive vice president and chief operating officer (Social Security number 798-56-3241). Valerie is the vice president of finance (Social Security number 879-21-4536). All officers devote 100 percent of their time to the business and all officers are U.S. citizens. BCS uses the accrual method of accounting and has a calendar year-end. BCS made four equal estimated tax payments of $8,750 (for each quarter). Its tax liability last year was $41,000. If it has overpaid its federal tax liability, BCS would like to receive a refund. BCS paid a dividend of $30,000 to its shareholders on November 1. BCS had ample earnings and profits (E&P) to absorb the distribution. The following is BCS's audited income statement for 2022: 1 of 3

BCS Income Statement For year ending December 31, 2022 Revenue from sales $ 1,800,000 Sales returns and allowances (5,000) Cost of goods sold (350,000) Gross profit from operations $ 1,445,000 Other income: Capital loss $ (15,000) Dividend income 25,000 Interest income 10,000 Gross income $ 1,465,000 Expenses: Compensation $ (950,000) Depreciation (10,000) Bad debt expense (15,000) Meals (3,000) Maintenance (6,000) Property taxes (11,000) State income taxes (45,000) Other taxes (44,000) Rent (60,000) Salary (5,000) Advertising (52,000) Professional services (16,000) Employee benefits (32,000) Supplies (5,000) Other expenses (27,000) Total expenses (1,281,000) Income before taxes 184,000 Federal income tax expense (42,000) Net income after taxes $ 142,000 1. Of the $10,000 interest income, $1,250 was from a City of Irvine bond that was used to fund public activities (issued in 2019), $1,750 was from an Oceanside city bond used to fund private activities (issued in 2019), $1,000 was from a U.S. Treasury bond, and the remaining $6,000 was from a money market account. 2. BCS's dividend income came from Clever Cakes Inc. (CC). BCS owned 10,000 shares of the stock in Clever Cakes at the beginning of the year. This represented 10 percent of SSM outstanding stock. 3. On October 1, 2022, BCS sold 1,000 shares of its CC stock for $25,000. It had originally purchased these shares on April 18, 2018, for $40,000. After the sale, BCS owned 9 percent of CC. 2 of 3

4. BCS's compensation is as follows: Cara $150,000 Janna $140,000 Valerie $130,000 Other $530,000 5. BCS wrote off $25,000 in accounts receivable as uncollectible during the year. 6. BCS's regular tax depreciation was $28,000. 7. Other expenses include $6,000 for premiums paid on term life insurance policies for which BCS is the beneficiary. The policies cover the lives of Cara, Janna, and Valerie. The following are BCS's audited balance sheets as of January 1, 2022, and December 31, 2022. 12/31/2021 12/31/2022 Assets Cash $ 180,000 $ 205,000 Accounts receivable 560,000 580,000 Allowance for doubtful accounts (60,000) (50,000) Inventory 140,000 150,000 U.S. government bonds 20,000 20,000 State and local bonds 120,000 120,000 Investments in stock 400,000 360,000 Fixed assets 140,000 160,000 Accumulated depreciation (50,000) (60,000) Other assets 20,000 21,000 Total assets $1,470,000 $1,506,000 Liabilities and Shareholders Equity Accounts payable $ 280,000 $ 240,000 Other current liabilities 20,000 18,000 Other liabilities 40,000 26,000 Capital stock 400,000 400,000 Retained earnings 730,000 822,000 Total liabilities and shareholders equity $1,470,000 $1,506,000

(Please do Schedule D and Schedule G )