Required: Complete Celebrity Catering Service Inc.s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms

CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own onethird of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 384743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231548976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798563241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879214536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar yearend. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Statement Income Sales Sales returns and allowances Net sales Cost of goods sold1 Gross profit Capital loss2 Dividend income3 Interest income4 Total income Expenses Salariesofficers Salaries and wages - other Bad Debt5 Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent Interest 6 Advertising Professional Services Supplies Depreciation (MACRS is $28,000)7 Employee benefits Programs Other Expenses8 Total expenses Net income before taxes Federal income taxes Net income after taxes $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventoryrelated purchases during 2014 were $360,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $40,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $10,000 interest income, $2,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 38-4743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar year-end. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Sales Sales returns and allowances Net sales 1 Cost of goods sold Gross profit 2 Capital loss 3 Dividend income 4 Interest income Total income Expenses Salaries-officers Salaries and wages - other 5 Bad Debt Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent 6 Interest Advertising Professional Services Supplies 7 Depreciation (MACRS is $28,000) Employee benefits Programs 8 Other Expenses Total expenses Net income before taxes Federal income taxes Net income after taxes Income Statement $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventory-related purchases during 2014 were $355,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $45,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $10,000 interest income, $2,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125-A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 38-4743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar year-end. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Sales Sales returns and allowances Net sales 1 Cost of goods sold Gross profit 2 Capital loss 3 Dividend income 4 Interest income Total income Expenses Salaries-officers Salaries and wages - other 5 Bad Debt Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent 6 Interest Advertising Professional Services Supplies 7 Depreciation (MACRS is $28,000) Employee benefits Programs 8 Other Expenses Total expenses Net income before taxes Federal income taxes Net income after taxes Income Statement $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventory-related purchases during 2014 were $355,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $45,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $10,000 interest income, $2,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125-A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 38-4743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar year-end. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Sales Sales returns and allowances Net sales 1 Cost of goods sold Gross profit 2 Capital loss 3 Dividend income 4 Interest income Total income Expenses Salaries-officers Salaries and wages - other 5 Bad Debt Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent 6 Interest Advertising Professional Services Supplies 7 Depreciation (MACRS is $30,000) Employee benefits Programs 8 Other Expenses Total expenses Net income before taxes Federal income taxes Net income after taxes Income Statement $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventory-related purchases during 2014 were $355,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $45,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $12,000 interest income, $4,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125-A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 38-4743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar year-end. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Sales Sales returns and allowances Net sales 1 Cost of goods sold Gross profit 2 Capital loss 3 Dividend income 4 Interest income Total income Expenses Salaries-officers Salaries and wages - other 5 Bad Debt Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent 6 Interest Advertising Professional Services Supplies 7 Depreciation (MACRS is $30,000) Employee benefits Programs 8 Other Expenses Total expenses Net income before taxes Federal income taxes Net income after taxes Income Statement $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventory-related purchases during 2014 were $355,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $45,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $12,000 interest income, $4,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125-A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 38-4743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar year-end. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Sales Sales returns and allowances Net sales 1 Cost of goods sold Gross profit 2 Capital loss 3 Dividend income 4 Interest income Total income Expenses Salaries-officers Salaries and wages - other 5 Bad Debt Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent 6 Interest Advertising Professional Services Supplies 7 Depreciation (MACRS is $30,000) Employee benefits Programs 8 Other Expenses Total expenses Net income before taxes Federal income taxes Net income after taxes Income Statement $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventory-related purchases during 2014 were $355,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $45,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $12,000 interest income, $4,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125-A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. CCS is located at 540 Waverly Way Burbank, CA 91501 Its employer ID is 38-4743474 CCS's business activity is catering food services. Its business activity code is 722300. The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. All officers devote 100% of their time to the business and all of the officers are US citizens. CCS uses the accrual method of accounting and has a calendar year-end. CCS made four equal quarterly estimated tax payments of $15,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. 1 | P a g e Income Sales Sales returns and allowances Net sales 1 Cost of goods sold Gross profit 2 Capital loss 3 Dividend income 4 Interest income Total income Expenses Salaries-officers Salaries and wages - other 5 Bad Debt Meals & Entertainment Repairs and Maintenance Property Taxes State Income Tax Other Taxes Rent 6 Interest Advertising Professional Services Supplies 7 Depreciation (MACRS is $30,000) Employee benefits Programs 8 Other Expenses Total expenses Net income before taxes Federal income taxes Net income after taxes Income Statement $470,000 525,000 15,000 18,800 8,000 11,000 43,000 14,000 30,000 5,000 52,000 16,000 5,000 12,000 32,000 12,000 $1,800,000 (5,000) 1,795,000 350,000 1,445,000 ($20,000) 24,000 12,000 $1,461,000 1.268,800 $192,200 [55,000] $137,200 1 CCS'S inventory-related purchases during 2014 were $355,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS. 2 On October 1, 2014 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $45,000. After the sale CCS owns 22.5 percent of SD. 3 CCS's dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SD's outstanding stock. 4 Of the $12,000 interest income, $4,200 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,900 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,100 was from a US Treasury Bond and the rest was from a money market account. 5 $32,000 was written off as uncollectible this year. 6 This is attributable to a business loan 7 None of the depreciation can be claimed on 1125-A 8 Includes $6,000 of premiums paid on term life insurance premiums covering Rachel, Paula and Gordon for which CCS is the beneficiary. 2 | P a g e Balance Sheet Assets Cash Trade and accounts receivables Allowance for Doubtful Accounts Inventories U.S. government bonds State & Local bonds Investment In Stock Prepaid federal income taxes Property, plant and equipment Accumulated depreciation Other assets Total Assets Liabilities and Owners' Equity Accounts payable Other current liabilities Other Liabilities Capital stock Retained earnings Total Liabilities and Owners' Equity 1/1/2014 $180,000 560,000 (60,000) 140,000 20,000 120,000 400,000 0 140,000 (50,000) 20.000 $1,470,000 $280,000 20,000 40,000 400,000 730,000 $1,470,000 12/31/14 $185,026 570,000 (43,000) 145,000 20,000 120,000 353,000 18,074 160,000 (60,000) 48,600 $1,516,700 $225,000 28,900 25,600 400,000 837,200 1,516,700 Required: Complete Celebrity Catering Service Inc.'s (CCS) 2014 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required. FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment. The forms schedules and instructions can be found at www.irs.gov and download the necessary forms. 3 | P a g e