S Corporation Guidance

The Tax Returns required that you Complete the tax return for S Corporation Tax Return Bottle- UP.

Table C11-3 is Bottle-Up Balance Sheet. You are to use this information to prepare the Schedule L. As an accountant you should know where these items are listed on the balance sheet. This is the key to preparing all Corporate tax returns. Corporate stock is considered other investments, bonds are tax exempt securities and Treasury bills are US Government Obligations. The accrued salaries payable, payroll taxes payable, sales taxes payable are other current liabilities.

Schedule M-1 Line includes the Travel and entertainment, Non-deductible expenses tax-exempt interest and depreciation.

Table C11-2 Income Statement information is used to prepare the front part for Form 1120S. The taxes and licenses should include payroll taxes and other taxes. Other deductions should total $226,102. These should be allowable expenses that were not identifiable on the front of the Form 1120S.

There are examples in the Appendix as well

Your completed tax return should have the following forms using the information stated above:

Form 1120S (Pages 1-5) with schedules B, K, L, M-1 and M-2 completed.

Schedule D Flows to Form 1120

Form 1125-A Flows to Form 1120

Form 4797 Flows to Form 1120

Form 4562 flow to 1120S

Schedule K-1 for each shareholder

It is best to prepare the flow through forms for the Form 1120S 1st and then the Schedules B, K, L, M-1 and M-2

Other Helpful Information Provided below:

Schedule K, Line 16c - Nondeductible expenses:

Keyperson life insurance premium $ 3,000

Penalties 1,000

Travel and entertainment expenses 10,500

Total $ 14,500

Form 1125-A, Line 5 - Other costs:

Supplies $ 80,000

Utilities 100,000

Depreciation 38,000

Other manufacturing costs 150,000

Total $368,000

Schedule L, Line 24 - Retained earnings reconciliation:

Retained earnings, beginning of tax year $330,000

Net income per books 133,362

Distributions, other than dividends (70,000)

Retained earnings, end of tax year $393,362

Schedule M-2, Line 3 - Other additions:

Interest income $ 1,200

Dividend income 11,600

LTCG 48,666

Total $ 61,466

Schedule M-2, Line 5 - Other reductions:

Sec. 1231 loss $ 1,100

Charitable contributions 9,000

Investment expenses 600

Investment interest 500

Nondeductible expenses (See Sch. M-1, Line 3b) 14,500

Total $ 25,700 Please fill out the 2018 1120S form using the following info

The $120,000 paid to Dr. Bailey is salary constituting W-2 wages instead of a guaran- teed payment). Ignore employment taxes (Social Security, etc.) on Dr. Bailey's salary. Ignore the U.S. (domestic) production activities deduction. Use book numbers for Schedule L and Schedule M-1 in Form 1120S. TABLE C:11-2 Bottle-Up, Inc. Income Statement for the Year Ended December 31 of the Current Year (Problem C:11-61) $2,500,000 (15,000) $2,485,000 $ 102,000 900,000 200,000 80,000 100,000 188,000" $1,570,000 (96,000) 1,474,000 $1,011,000 Sales Returns and allowances Net sales Beginning inventory Purchases Labor Supplies Utilities Other manufacturing costs Goods available for sale Ending inventory Gross profit Salariesc Utilities expense Depreciation (MACRS depreciation is $36,311) Automobile and truck expense Office supplies expense Advertising expense Bad debts expense Rent expense Interest expense Meals and entertainment expense Selling expenses Repairs and maintenance expense Accounting and legal expense Charitable contributions $ 451,020 54,000 11,782 26,000 9,602 105,000 620 30,000 1,500 21,000 100,000 38,000 4,500 9,000 Investment interest expensei 5500. All other interest expence c trade-or business-related. None of the interest pense relates to the production of tax-exempt income. The corporation made all contribution in cach to qualifying charitie. includes $3,000 of premium paid for polides on lives of corporate officer Bottle-up is the beneficiary for both poliches 9 The corporation acquired the capital acrets on March 3, 2015 for $100,000 and sold them on September 15, 2017, for 5148,666. "The corporation acquired the 24. 1231 property on June 5, 2016 for $10,000 and sold it on December 21, 2017, for $8.900 TABLE C:11-3 Bottle-Up, Inc. Balance Sheet for January 1 and December 31 of the Current Year (Problem C:11-61) January 1 December 31 Assets: Cash Accounts receivable Inventories Stocks Treasury bills State of Florida bonds Building and equipment Minus: Accumulated depreciation Land Total $ 15,000 41,500 102,000 103,000 15,000 10,000 374,600 (160,484) 160,000 $660,616 $116,948 45,180 96,000 74.000 16,000 10.000 375,000 (173,100) 190,000 $750,028 Liabilities and equities: Accounts payable Accrued salaries payable Payroll taxes payable Sales taxes payable Due to Mr. Hiebert Mortgage and notes payable (current maturities) Long-term debt Capital stock Retained earnings Total $36.000 12.000 3.416 5.200 10.000 44,000 210.000 10.000 330,000 $660.616 $ 10,000 6.000 7,106 6,560 5,000 52.000 260,000 10,000 393,362 $750,028 The $120,000 paid to Dr. Bailey is salary constituting W-2 wages instead of a guaran- teed payment). Ignore employment taxes (Social Security, etc.) on Dr. Bailey's salary. Ignore the U.S. (domestic) production activities deduction. Use book numbers for Schedule L and Schedule M-1 in Form 1120S. TABLE C:11-2 Bottle-Up, Inc. Income Statement for the Year Ended December 31 of the Current Year (Problem C:11-61) $2,500,000 (15,000) $2,485,000 $ 102,000 900,000 200,000 80,000 100,000 188,000" $1,570,000 (96,000) 1,474,000 $1,011,000 Sales Returns and allowances Net sales Beginning inventory Purchases Labor Supplies Utilities Other manufacturing costs Goods available for sale Ending inventory Gross profit Salariesc Utilities expense Depreciation (MACRS depreciation is $36,311) Automobile and truck expense Office supplies expense Advertising expense Bad debts expense Rent expense Interest expense Meals and entertainment expense Selling expenses Repairs and maintenance expense Accounting and legal expense Charitable contributions $ 451,020 54,000 11,782 26,000 9,602 105,000 620 30,000 1,500 21,000 100,000 38,000 4,500 9,000 Investment interest expensei 5500. All other interest expence c trade-or business-related. None of the interest pense relates to the production of tax-exempt income. The corporation made all contribution in cach to qualifying charitie. includes $3,000 of premium paid for polides on lives of corporate officer Bottle-up is the beneficiary for both poliches 9 The corporation acquired the capital acrets on March 3, 2015 for $100,000 and sold them on September 15, 2017, for 5148,666. "The corporation acquired the 24. 1231 property on June 5, 2016 for $10,000 and sold it on December 21, 2017, for $8.900 TABLE C:11-3 Bottle-Up, Inc. Balance Sheet for January 1 and December 31 of the Current Year (Problem C:11-61) January 1 December 31 Assets: Cash Accounts receivable Inventories Stocks Treasury bills State of Florida bonds Building and equipment Minus: Accumulated depreciation Land Total $ 15,000 41,500 102,000 103,000 15,000 10,000 374,600 (160,484) 160,000 $660,616 $116,948 45,180 96,000 74.000 16,000 10.000 375,000 (173,100) 190,000 $750,028 Liabilities and equities: Accounts payable Accrued salaries payable Payroll taxes payable Sales taxes payable Due to Mr. Hiebert Mortgage and notes payable (current maturities) Long-term debt Capital stock Retained earnings Total $36.000 12.000 3.416 5.200 10.000 44,000 210.000 10.000 330,000 $660.616 $ 10,000 6.000 7,106 6,560 5,000 52.000 260,000 10,000 393,362 $750,028