Question
Swift Corporation was formed on January 10, 1995, by James Brown and Martha Swift to sell clothing. Pertinent information regarding Swift is summarized as follows:
Swift Corporation was formed on January 10, 1995, by James Brown and Martha Swift to sell clothing. Pertinent information regarding Swift is summarized as follows:
c) James and Martha each own one-half of the outstanding common stock; no other class of stock is authorized. James is president of the company, and Martha is secretary- treasurer. Both are full-time employees of the corporation, and each receives a salary of $70,000. Jamess SSN is 123-45-6789; Marthas SSN is 987-65-4321.
d) The corporation uses the accrual method of accounting and reports on a calendar basis. The specific charge-off method is used in handling bad debt losses, and inventories are determined using the lower of cost of market method. For book and tax purposes, the straight-line method of depreciation is used. Assume that the company qualifies as a small business taxpayer for inventory purposes and that it meets the gross receipts test under IRC Sec. 448(c). The company is compliant with any other Federal tax compliance requirements.
e) During 2022, the corporation distributed a cash dividend of $35,000. Swifts profit and loss statement reflects the following information:
Account |
| Debit | Credit |
Gross sales |
|
| $1,045,000 |
Sales returns and allowances |
| $50,000 |
|
Purchases |
| 506,000 |
|
Dividends received from stock investments in less-than-20%-owned U.S. corporations |
|
| 60,000 |
Interest income |
|
|
|
State bonds | $4,000 |
|
|
Certificates of deposit | 6,000 |
| 10,000 |
Premiums on term life insurance policies on the lives of James and Martha; Swift Corporation is the designated beneficiary |
| 8,000 |
|
Salaries officers |
| 140,000 |
|
Salaries clerical and sales |
| 100,000 |
|
Taxes (state, local, and payroll) |
| 35,000 |
|
Repairs |
| 20,000 |
|
Interest expense |
|
|
|
Loan to purchase state bonds | $2,000 |
|
|
Other business loans | 10,000 | 12,000 |
|
Advertising |
| 8,000 |
|
Rental expense |
| 24,000 |
|
Depreciation |
| 16,000 |
|
Other deductions |
| 21,000 |
|
A statement technically needs to be attached to the return to provide detail of the $21,000 other deductions. Exclude this statement from your file.
f) A comparative balance sheet for Swift Corporation reveals the following information:
Assets | January 1, 2022 | December 31, 2022 |
Cash | $240,000 | $178,850 |
Trade notes and accounts receivable | 104,200 | 142,300 |
Inventories | 200,000 | 256,000 |
Certificates of deposit | 150,000 | 150,000 |
State bonds | 100,000 | 100,000 |
Prepaid Federal tax | -0- | 2,530 |
Stock investment | 300,000 | 400,000 |
Buildings and other depreciable assets | 120,000 | 120,000 |
Accumulated depreciation | (44,400) | (60,400) |
Land | 10,000 | 10,000 |
Other assets | 1,800 | 1,000 |
Total assets | $1,181,600 | $1,300,280 |
|
|
|
Liabilities and Equity | January 1, 2022 | December 31, 2022 |
Accounts payable | $150,000 | $125,000 |
Other current liabilities | 40,150 | 36,300 |
Mortgages | 105,000 | 100,000 |
Capital stock | 250,000 | 250,000 |
Retained earnings (unappropriated) | 636,450 | 788,980 |
Total liabilities and equity | $1,181,600 | $1,300,280 |
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