Question
Scenario 4 - Spotless Cleaners Complete Form 1120-S for Spotless Cleaners. Do not elect the extra depreciation allowance and do not take any Section 179
Scenario 4 - Spotless Cleaners
Complete Form 1120-S for Spotless Cleaners. Do not elect the extra depreciation allowance and do not take any Section 179 deduction.
Spotless Cleaners, EIN 54-1556216, 9013 Castle Wood Rd., Your City, Your Town - Your Zip, a cleaning service which operates on an accrual basis, was incorporated January 10 of the current tax year and elected S corporation status. The corporation utilizes a calendar year.
Spotless has two shareholders: Michael Taylor, SSN 555-00-9654, 300 W. Graves Ave., Your City, Your Town - Your Zip, who owns 75% and purchased 150 shares for $75 par value; and Mary Jane Taylor, SSN 222-00-8965, same address, who is a 25% owner and purchased 50 shares for $75 par value. They received a cash distribution (divided according to percentage of ownership) of $15,000 on May 7 of the current tax year.
Spotless Cleaners borrowed $20,000 to cover expenses. $2,000 was payable on April 25 of the current tax year and $6,000 per year for the next three years. The accounts payable balance as of December 31 of the current tax year was $2,500. The accounts receivable balance as of December 31 of the current tax year was $1,000.
Spotless has two identical trucks (each weighs less than 6000 lbs. loaded) that are driven only for business. Michael contributed one truck and Mary Jane contributed the other one. A different person drives each truck.
Note: Assume the meals expense is not eligible for the increased 100% deduction.
Vehicle Information | |||
Vehicle | Date placed into service | Cost | Miles driven during the year |
Truck 1 | 03/01/current year | $12,000 | 3,634 miles |
Truck 2 | 03/01/current year | $12,000 | 3,634 miles |
Additional financial information for Spotless Cleaners is provided on the following page.
Spotless Cleaners Financial Information | ||||
ItemAmount | ||||
Gross receipts $ 55,440 | ||||
Returns and allowances$ 146 | ||||
Interest income on receivables $ 1,000 | ||||
Wages and salaries to employees$ 8,200 | ||||
Repairs and maintenance $ 785 | ||||
Taxes | $ 1,000 | |||
Licenses $ 590 | ||||
Rent on the building$ 2,400 | ||||
Advertising expense $ 500 | ||||
Charitable contributions to United Way$ 2,000 | ||||
Voice mail $ 100 | ||||
Bonding insurance | $ 125 | |||
Workers' compensation insurance $ 1,000 | ||||
Cell phone$ 111 | ||||
Office expenses $ 1,250 | ||||
Uniforms$ 228 | ||||
Bank service charges $ 100 | ||||
Gasoline and oil | $ 2,500 | |||
Auto repairs $ 425 | ||||
Airfare and hotels$ 500 | ||||
Automobile insurance $ 1,000 | ||||
Liability insurance$ 818 | ||||
Retail Merchants membership $ 150 | ||||
Cleaning and supplies $ 5,895 | ||||
Parking and tolls $ 175 | ||||
Accounting services$ 375 | ||||
Subcontractor labor $ 1,750 | ||||
Meals $ 220 | ||||
Christmas gifts (20 persons @ $45/person) $ 900 |
Answer the following question based on Scenario 4. What is the beginning cash balance for Spotless?
a) $11,250 b) $18,397 c) $15,000 d)$ 0
Answer the following question based on Scenario 4. What is the ending cash balance for Spotless?
a) $15,000 b) $33,397 c) $42,697 d) $18,397
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