Using the attached information for Melodic Musical Sales in prepare full and complete tax return for 2020 using the forms in irs.gov. The return should be as if sent to the IRS - I am the IRS Accepting Center, any omission will be reflected in your grade! No software is allowed and no points for software preparation would be given. So in the following pages you should use only the information for the firm CASE 2 A.nd CASE 2 B.pdf CASE 2 C.pdf CASE 2 D.pdf irse C:3-66 TAX FORM/RETURN PREPARATION PROBLEMS Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of XX-2020018. The company incorporated on December 31, 2014, and began business on January 2, 2015. Table C:3-3 contains balance sheet information at January 1, 2018, and December 31, 2018. Table C:3-4 presents an unaudited GAAP income state- ment for 2018. These rules are presented on a book basis. Other information follows the tables. TABLE C:3-3 Melodic Musical Sales, in. Book Balance Sheet Information January 1, 2018 Debit Credit December 31, 2018 Debit Credit Account Cash Accounts receivable Allowance for doubtful accounts Inventory Investment in corporate stock Investment in municipal bonds Cash surrender value of insurance policy Land Buildings Accumulated depreciation Buildings Equipment Accumulated depreciation Equipment Trucks Accumulated depreciation --Trucks Accounts payable Notes payable (short-term) Accrued payroll taxes Accrued state income taxes Accrued federal income taxes Bonds payable ong-term) Net deferred tax liability Capital stock-Common Retained earnings--Unappropriated Totals $ 516,774 $ 815,494 400,000 500,000 20,000 $ 25,000 2,500,000 3,500,000 260,000 50,000 30,000 30,000 60,000 80,000 200,000 200,000 2,000,000 2,000,000 100,000 140,000 750,000 1,100,000 187.500 205,000 100,000 100,000 30,000 50,000 300,000 270,000 800,000 640,000 14,880 18,600 4,500 7.500 2,500 77,361 1,800,000 600,000 57,394 167.593 1,500,000 1,500,000 2,000,000 4,674,440 56,816,774 56,816,774 58,375,494 $8,375,494 TADLE C34 Melodie Musical Sales, inc-Book Income Statement 2018 $10,000,000 50.000 119.750,000 2.500.000 5.500,000 0.500.000 (4 500,000) 55.250,000 Sales Return Net Beginning wentary Purchase Ending inventory Cost of goods sold Gross profit Expenses Depreciation Repairs General Insurance Net premium-Officers' life insurand Officers' compensation Other salaries Utilities Advertising Legal and accounting fees Charitable contributions Payroll faces interest expense Bad debt pery Total expenses Gain on sale of equipment Interest on mun pal bonds Net gain on stock sales Dividend income Net income before income taxes Federal income tax expense State income tax expense Net income 5 152 500 20.500 55,000 30,000 650.000 400,000 72.000 43,000 50.000 30,000 62.000 210,000 45.000 (1.825.000) 105,000 5,000 45.000 12000 $ 3,592,000 (742,560) (25.000) 5274440 Estimated Tax Payments (Form 22209 The corporation deposited estimated tax payments as follows: April 15, 2018 $ 75,000 June 15, 2018 150,000 September 15, 2018 165,000 December 15, 2018 165,000 Total $555,000 Taxable income in 2017 was $1.2 million, and the 2017 tax was $405,000 (at the 34% tax rate in effect in 2017). The corporation earned its 2018 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods. Intory and Cost of Goods Sold (Form 1125 AM The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected on Form 1125-A. No other costs or expenses are allocated to cost of goods sold. Note: Assume the corporation is exempt from the uniform capitalization (UNICAP) rules MacBook Air The Corporate Income Tax Corporation 3 the year The corporation did not make the expensing election under Sec. 179 or take bons depreca tion on any property red before 2018. Accumulated to depercution through Decem ber 31, 2017, on the properties is as follow Store building $ 151,750 Equipment 140.675 Equipment 2 251,350 Tracks $2.000 On October 16, 2018, the corporation sold for $280,000 Equipment that oneally cout $250,000 on January 2, 2015. The corporation had no Sec. 1231 lowes from prior years. In a separate transaction on October 17, 2018, the corporation acquired and placed in service a piece of equipment conting 5600,000. Asume these two transactions do not quality as a like-kind exchange. The new equipment is om-year property. The corpora tion made the Sec. 179 expensing section with regard to the new equipment for the entire cost of this property. Where applicable, use published is depreciation tables to compute 2018 depreciation (reproduced in Appendix of this text). Other Information . Ignore the accumulated earnings tax The corporation received dividends (wee Income Statement in Table 34 from tax- able, domestic corporations, the stock of which Melodic Musical Sales, Inc. owns les The corporation paid $100,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings The state income tax in Table C 3-4 is the exact amount of such taxes incurred during The corporation is not entitled any credits. lignore the financial statement impact of any underpayment penalties incurred on the tax mum. Required: Prepare the 2018 corporate tax return for Melodic Musical Sales, Inc. along with any neowary supporting schedules. Optional Prepare both Schedule M-3 (but omit Schedule and Form 8916-Aland Sched ule M-1 even though the IRS does not require both Schedule M1 and Schedule M-3. Note to Instructor See solution in the Instructor's Resource Manual for other optional information to provide to students, 03-67 Permtemp Corporation formed in 2017 and, for that year, reported the following book income statement and halance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities: Sales $20,000,000 Cost of goods sold 115.000.000 Gross profit $ 5,000,000 Dividend income Tax-exempt interest income 15,000 Total income $ 5,065,000 Expenses: Depreciation $ 800,000 Rad debts 400,000 Charitable contributions 100,000 Interest 475,000 Meals and entertainment 45,000 Other 3,855,000 Total expenses 15,675,000 Netlos before federal income taxes $(610,000) 50,000 15 2 Line 9 (a) Check ) (b), (c) & (di Not applicable (e) & 0) No Compensation of Officer (Form 1125-E). La Mary Travis XXX-XX-XXXX 100% 50% $290,000 John Willis XXX-XX-XXXX 100% 23% 180,000 Chris Parker XXX-XX-XXXX 100% 25% 180,000 Total $650,000 Bad Debts For tax purposes, the corporation uses the direct writeoff method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2018, the corporation charged $40,000 to the allowance account, such amount represent ing actual writeoffs for 2018, Additional Information (Schedule 1 b Accrual 2a 451140 b Retail sales C Musical instruments 3 No 4a No b Yes: omit Schedule G Sa No b No No 8 Do not check box 9 10 11 12 1.3.14 15 b 16-23 24 25 Fill in the correct amount 3 Do not check box Not applicable No No Do not check box No Yes No Urganizational Expenditures: The corporation incurred less than $5,000 of organizational expenditures in the year it began business. For book purposes, the corporation expensed the entire expenditure. For tax purposes, the corporation elected under Sex 248 to deduct the entire amount of ex. penditures in the year it began business. Therefore, no amortization expenditures appear in the tax return or book financial statments for the current year. Capital Gains and Losses: The corporation sold 100 shares of IDQ Corp. common stock on October 8, 2018, for $145,000. The corporation acquired the stock on December 15, 2017, for $90,000 The corporation also sold 75 shares of JSB Corp. common stock on June 18, 2018, for $110,000. The corporation acquired this stock on September 18, 2016, for $120,000. The corporation has a $15,000 capital loss carryover from 2017. These transactions were not reported to the corporation on Form 1099.B. Fixed Assets and Depreciation For book purposes: The corporation uses straight-line depreciation over the useful lives of assets as follows store building, 50 years, equipment, ten years, and trucks, five years. The corporation takes a half-year's depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements in Tables C13-3 and C34 reflect these calculations, For tax purposes. All assets are MACRS property as follows store building, 39-year nonresi dential real property, equipment, seven-year property, and trucks, five-year property. The corporation acquired the store building for $2 million and placed it in service on January 2, 2015. The corporation acquired two pieces of equipment for $250,000 (Equipment 1) and $500,000 (Equipment 2) and placed them in service on January 2, 2015. The corpora tion acquired the trucks for $100,000 and placed them in service on July 18, 2016. The trucks are not listed property and are not subject to the limitation on luxury automobiles I TOT Using the attached information for Melodic Musical Sales in prepare full and complete tax return for 2020 using the forms in irs.gov. The return should be as if sent to the IRS - I am the IRS Accepting Center, any omission will be reflected in your grade! No software is allowed and no points for software preparation would be given. So in the following pages you should use only the information for the firm CASE 2 A.nd CASE 2 B.pdf CASE 2 C.pdf CASE 2 D.pdf irse C:3-66 TAX FORM/RETURN PREPARATION PROBLEMS Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of XX-2020018. The company incorporated on December 31, 2014, and began business on January 2, 2015. Table C:3-3 contains balance sheet information at January 1, 2018, and December 31, 2018. Table C:3-4 presents an unaudited GAAP income state- ment for 2018. These rules are presented on a book basis. Other information follows the tables. TABLE C:3-3 Melodic Musical Sales, in. Book Balance Sheet Information January 1, 2018 Debit Credit December 31, 2018 Debit Credit Account Cash Accounts receivable Allowance for doubtful accounts Inventory Investment in corporate stock Investment in municipal bonds Cash surrender value of insurance policy Land Buildings Accumulated depreciation Buildings Equipment Accumulated depreciation Equipment Trucks Accumulated depreciation --Trucks Accounts payable Notes payable (short-term) Accrued payroll taxes Accrued state income taxes Accrued federal income taxes Bonds payable ong-term) Net deferred tax liability Capital stock-Common Retained earnings--Unappropriated Totals $ 516,774 $ 815,494 400,000 500,000 20,000 $ 25,000 2,500,000 3,500,000 260,000 50,000 30,000 30,000 60,000 80,000 200,000 200,000 2,000,000 2,000,000 100,000 140,000 750,000 1,100,000 187.500 205,000 100,000 100,000 30,000 50,000 300,000 270,000 800,000 640,000 14,880 18,600 4,500 7.500 2,500 77,361 1,800,000 600,000 57,394 167.593 1,500,000 1,500,000 2,000,000 4,674,440 56,816,774 56,816,774 58,375,494 $8,375,494 TADLE C34 Melodie Musical Sales, inc-Book Income Statement 2018 $10,000,000 50.000 119.750,000 2.500.000 5.500,000 0.500.000 (4 500,000) 55.250,000 Sales Return Net Beginning wentary Purchase Ending inventory Cost of goods sold Gross profit Expenses Depreciation Repairs General Insurance Net premium-Officers' life insurand Officers' compensation Other salaries Utilities Advertising Legal and accounting fees Charitable contributions Payroll faces interest expense Bad debt pery Total expenses Gain on sale of equipment Interest on mun pal bonds Net gain on stock sales Dividend income Net income before income taxes Federal income tax expense State income tax expense Net income 5 152 500 20.500 55,000 30,000 650.000 400,000 72.000 43,000 50.000 30,000 62.000 210,000 45.000 (1.825.000) 105,000 5,000 45.000 12000 $ 3,592,000 (742,560) (25.000) 5274440 Estimated Tax Payments (Form 22209 The corporation deposited estimated tax payments as follows: April 15, 2018 $ 75,000 June 15, 2018 150,000 September 15, 2018 165,000 December 15, 2018 165,000 Total $555,000 Taxable income in 2017 was $1.2 million, and the 2017 tax was $405,000 (at the 34% tax rate in effect in 2017). The corporation earned its 2018 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods. Intory and Cost of Goods Sold (Form 1125 AM The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected on Form 1125-A. No other costs or expenses are allocated to cost of goods sold. Note: Assume the corporation is exempt from the uniform capitalization (UNICAP) rules MacBook Air The Corporate Income Tax Corporation 3 the year The corporation did not make the expensing election under Sec. 179 or take bons depreca tion on any property red before 2018. Accumulated to depercution through Decem ber 31, 2017, on the properties is as follow Store building $ 151,750 Equipment 140.675 Equipment 2 251,350 Tracks $2.000 On October 16, 2018, the corporation sold for $280,000 Equipment that oneally cout $250,000 on January 2, 2015. The corporation had no Sec. 1231 lowes from prior years. In a separate transaction on October 17, 2018, the corporation acquired and placed in service a piece of equipment conting 5600,000. Asume these two transactions do not quality as a like-kind exchange. The new equipment is om-year property. The corpora tion made the Sec. 179 expensing section with regard to the new equipment for the entire cost of this property. Where applicable, use published is depreciation tables to compute 2018 depreciation (reproduced in Appendix of this text). Other Information . Ignore the accumulated earnings tax The corporation received dividends (wee Income Statement in Table 34 from tax- able, domestic corporations, the stock of which Melodic Musical Sales, Inc. owns les The corporation paid $100,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings The state income tax in Table C 3-4 is the exact amount of such taxes incurred during The corporation is not entitled any credits. lignore the financial statement impact of any underpayment penalties incurred on the tax mum. Required: Prepare the 2018 corporate tax return for Melodic Musical Sales, Inc. along with any neowary supporting schedules. Optional Prepare both Schedule M-3 (but omit Schedule and Form 8916-Aland Sched ule M-1 even though the IRS does not require both Schedule M1 and Schedule M-3. Note to Instructor See solution in the Instructor's Resource Manual for other optional information to provide to students, 03-67 Permtemp Corporation formed in 2017 and, for that year, reported the following book income statement and halance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities: Sales $20,000,000 Cost of goods sold 115.000.000 Gross profit $ 5,000,000 Dividend income Tax-exempt interest income 15,000 Total income $ 5,065,000 Expenses: Depreciation $ 800,000 Rad debts 400,000 Charitable contributions 100,000 Interest 475,000 Meals and entertainment 45,000 Other 3,855,000 Total expenses 15,675,000 Netlos before federal income taxes $(610,000) 50,000 15 2 Line 9 (a) Check ) (b), (c) & (di Not applicable (e) & 0) No Compensation of Officer (Form 1125-E). La Mary Travis XXX-XX-XXXX 100% 50% $290,000 John Willis XXX-XX-XXXX 100% 23% 180,000 Chris Parker XXX-XX-XXXX 100% 25% 180,000 Total $650,000 Bad Debts For tax purposes, the corporation uses the direct writeoff method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2018, the corporation charged $40,000 to the allowance account, such amount represent ing actual writeoffs for 2018, Additional Information (Schedule 1 b Accrual 2a 451140 b Retail sales C Musical instruments 3 No 4a No b Yes: omit Schedule G Sa No b No No 8 Do not check box 9 10 11 12 1.3.14 15 b 16-23 24 25 Fill in the correct amount 3 Do not check box Not applicable No No Do not check box No Yes No Urganizational Expenditures: The corporation incurred less than $5,000 of organizational expenditures in the year it began business. For book purposes, the corporation expensed the entire expenditure. For tax purposes, the corporation elected under Sex 248 to deduct the entire amount of ex. penditures in the year it began business. Therefore, no amortization expenditures appear in the tax return or book financial statments for the current year. Capital Gains and Losses: The corporation sold 100 shares of IDQ Corp. common stock on October 8, 2018, for $145,000. The corporation acquired the stock on December 15, 2017, for $90,000 The corporation also sold 75 shares of JSB Corp. common stock on June 18, 2018, for $110,000. The corporation acquired this stock on September 18, 2016, for $120,000. The corporation has a $15,000 capital loss carryover from 2017. These transactions were not reported to the corporation on Form 1099.B. Fixed Assets and Depreciation For book purposes: The corporation uses straight-line depreciation over the useful lives of assets as follows store building, 50 years, equipment, ten years, and trucks, five years. The corporation takes a half-year's depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements in Tables C13-3 and C34 reflect these calculations, For tax purposes. All assets are MACRS property as follows store building, 39-year nonresi dential real property, equipment, seven-year property, and trucks, five-year property. The corporation acquired the store building for $2 million and placed it in service on January 2, 2015. The corporation acquired two pieces of equipment for $250,000 (Equipment 1) and $500,000 (Equipment 2) and placed them in service on January 2, 2015. The corpora tion acquired the trucks for $100,000 and placed them in service on July 18, 2016. The trucks are not listed property and are not subject to the limitation on luxury automobiles I TOT