We are preparing the 2019 return because I don't want to incorporate the TEMPORARY tax law changes applicable to 2020 and 2021 due to COVID relief. After 2021, it is expected that the law will revert back to pre-2020 rules.

The purpose of having you prepare a tax return is to show you how what you have learned so far translates into the actual forms that you need to file with the IRS.

Note that Form 4797 is used to report sales of business property. HINT: If you sold business property that is subject to depreciation recapture (i.e. Section 1245), you will want to begin with Part III of the form and then just follow the line instructions. The form will guide you.

Required:

1. Complete the following schedules on Form 1120 (attached to this assignment).
	1. Page 1
	2. Page 3, Schedule J
	3. Page 4, Schedule K, Lines 1 through 4 only
	4. Page 6, Schedule L, M-1 and M-2
	5. Form 4797
3. Pay attention to detail. For instance, note the dates of the balance sheet information
provided. Don't make a silly mistake and insert the wrong balance sheet amounts
in the Form 1120.
4. Hint: you should have 10 categories of book/tax differences.
5. Another hint: The amounts on page 1 of Form 1120 represent
TAX numbers, not BOOK. For instance, the depreciation number
you show on page 1 should be the tax depreciation number,
not the book. So, it would be to your benefit to complete
the "Schedule M-1 increase (decrease)" column in the book
income statement tab prior to entering the amounts on page 1
Form 1120.

General info 1. Yorktown Inc. is filing a tax return for the 2019 tax year. 2. The address of the company is 123 Middle Way, Hinckley, OH 44233 3. Yorktown's EIN is 24-3352154 4. Yorktown was incorporated on3/5/2012 5. Yorktown uses the accrual method of accounting 6. Yorktown's business activity code is 451110 7. Yorktown is in the business is selling sporting goods 8. Yorktown is a stand alone corporation, i.e. Yorktown is neither a parent nor a subsidiary in an affiliated group. 9. No one individual or entity owns more than 20% of the company Other financial information: 1. The company paid dividends of $50,000 in 2019. 2. Salaries expense includes a bonus accrual for $65,000. The bonus was paid on April 15, 2020 3. Depreciation expense for tax purposes was $110,000 4. Accounts written off during the year totaled $9,900, and the addition to the allowance for the year was $12,000. 5. $7,500 of the warranty expense accrued on the books had been provided as of 9/15/20. The company has adopted the recurring item exception. 6. Salaries expense includes an accrual for year end salaries of $30,000. Those salaries were paid on January 15, 2020 7. The following information relates to the sale of the equipment: Date acquired: 4/12/2015 Date sold: 7/7/2019 Sales Price: $ 26,232 Accumulated depreciation $ 58,268 Original Cost: $ 75,000 8. The company made the following estimated tax payments during 2019: 4/15/2019 $ 30,000 6/15/2019 $ 30,000 9/15/2019 $ 15,000 12/15/2019 $ 25,000 9. If there is an overpayment, the company wants their overpayment credited to next year's estimated tax Yorktown Inc. Balance Sheet 12/31/2019 12/31/2019 12/31/2018 $ 350,470 $ 229,852 ASSETS Current Assets: Cash Accounts Receivable Allowance for Bad Debts Inventory Tax exempt securities Prepaid Rent Total Current Assets 733,985 11,300 539,538 5,900 722,685 1,017,491 200,000 74,507 2,365,153 533,638 883,031 200,000 52,242 1,898,763 Property and Equipment: Equipment Less: Accumulated depreciation $ 1,301,267 397,056 931,764 293,233 904,211 638,531 Intangible Assets Less: Accumulated amortization Other assets 100,154 35,844 99,801 24,115 64,310 110,204 75,686 145,652 Total Assets $ 3,443,878 $ 2,758,632 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Accounts Payable Long term debt payable in less than 1 year Other current liabilities Total current liabilities Long term debt Other long term liabilities Total liabilities 281,575 26,547 149,137 457,259 790,388 137,227 1,384,874 200,460 41,662 136,350 378,472 617,070 94,868 1,090,410 Stockholders' Equity: Common Stock Additional Paid in Capital Retained Earnings - Unappropriated Total stockholders' equity 145 771,341 1,287,518 2,059,004 144 591,545 1,076,533 1,668,222 Total liabilities and stockholders' equity $ 3,443,878 $ 2,758,632 Yorktown, Inc. Income Statement Year ended 12/31/19 Book balance 12/31/2019 Schedule M-1 Tax Balance Increase (decrease) 12/31/2019 Sales Cost of Goods Sold Gross Profit 4,825,335 2,584,724 2,240,611 Gain on Sale of equipment 13,000 Total income 2,253,611 Selling, General and Administrative Expenses Salaries and Wages Bad Debt Expense Repairs Rents Charitable contributions Property Taxes Other Taxes Advertising Employee benefits Depreciation Pension Other expenses - See detail of other expenses tab 1,311,732 12,000 10,000 25,884 52,323 45,000 56,000 44,000 32,000 87,000 61,000 95,442 Total SG&A Expenses 1,832,381 Income from operations 421,230 Interest Expense - net - see detail in net interest expense tal 28,942 Income before income taxes 392,288 Federal Income tax expense 131,303 Net income 260,985 Other expenses detail Schedule M-1 Tax Balance Increase (decrease) 12/31/2019 Warranty expense Supplies Miscellaneous Property insurance Telephone and internet Country Club Dues Meals Total other expenses Book balance 12/31/2019 23,912 9,523 3,750 16,464 14,793 10,000 17,000 95,442 Net interest expense Book balance Schedule M-1 Tax Balance 12/31/2019 Increase (decrease) 12/31/2019 Tax exempt interest income from state and local municipal bonc $ Bank interest expense (6,500) 35,442 Tota interest expense (net) $ 28,942 Note that "net" interest expense represents interest expense reduced by interest income. General info 1. Yorktown Inc. is filing a tax return for the 2019 tax year. 2. The address of the company is 123 Middle Way, Hinckley, OH 44233 3. Yorktown's EIN is 24-3352154 4. Yorktown was incorporated on3/5/2012 5. Yorktown uses the accrual method of accounting 6. Yorktown's business activity code is 451110 7. Yorktown is in the business is selling sporting goods 8. Yorktown is a stand alone corporation, i.e. Yorktown is neither a parent nor a subsidiary in an affiliated group. 9. No one individual or entity owns more than 20% of the company Other financial information: 1. The company paid dividends of $50,000 in 2019. 2. Salaries expense includes a bonus accrual for $65,000. The bonus was paid on April 15, 2020 3. Depreciation expense for tax purposes was $110,000 4. Accounts written off during the year totaled $9,900, and the addition to the allowance for the year was $12,000. 5. $7,500 of the warranty expense accrued on the books had been provided as of 9/15/20. The company has adopted the recurring item exception. 6. Salaries expense includes an accrual for year end salaries of $30,000. Those salaries were paid on January 15, 2020 7. The following information relates to the sale of the equipment: Date acquired: 4/12/2015 Date sold: 7/7/2019 Sales Price: $ 26,232 Accumulated depreciation $ 58,268 Original Cost: $ 75,000 8. The company made the following estimated tax payments during 2019: 4/15/2019 $ 30,000 6/15/2019 $ 30,000 9/15/2019 $ 15,000 12/15/2019 $ 25,000 9. If there is an overpayment, the company wants their overpayment credited to next year's estimated tax Yorktown Inc. Balance Sheet 12/31/2019 12/31/2019 12/31/2018 $ 350,470 $ 229,852 ASSETS Current Assets: Cash Accounts Receivable Allowance for Bad Debts Inventory Tax exempt securities Prepaid Rent Total Current Assets 733,985 11,300 539,538 5,900 722,685 1,017,491 200,000 74,507 2,365,153 533,638 883,031 200,000 52,242 1,898,763 Property and Equipment: Equipment Less: Accumulated depreciation $ 1,301,267 397,056 931,764 293,233 904,211 638,531 Intangible Assets Less: Accumulated amortization Other assets 100,154 35,844 99,801 24,115 64,310 110,204 75,686 145,652 Total Assets $ 3,443,878 $ 2,758,632 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Accounts Payable Long term debt payable in less than 1 year Other current liabilities Total current liabilities Long term debt Other long term liabilities Total liabilities 281,575 26,547 149,137 457,259 790,388 137,227 1,384,874 200,460 41,662 136,350 378,472 617,070 94,868 1,090,410 Stockholders' Equity: Common Stock Additional Paid in Capital Retained Earnings - Unappropriated Total stockholders' equity 145 771,341 1,287,518 2,059,004 144 591,545 1,076,533 1,668,222 Total liabilities and stockholders' equity $ 3,443,878 $ 2,758,632 Yorktown, Inc. Income Statement Year ended 12/31/19 Book balance 12/31/2019 Schedule M-1 Tax Balance Increase (decrease) 12/31/2019 Sales Cost of Goods Sold Gross Profit 4,825,335 2,584,724 2,240,611 Gain on Sale of equipment 13,000 Total income 2,253,611 Selling, General and Administrative Expenses Salaries and Wages Bad Debt Expense Repairs Rents Charitable contributions Property Taxes Other Taxes Advertising Employee benefits Depreciation Pension Other expenses - See detail of other expenses tab 1,311,732 12,000 10,000 25,884 52,323 45,000 56,000 44,000 32,000 87,000 61,000 95,442 Total SG&A Expenses 1,832,381 Income from operations 421,230 Interest Expense - net - see detail in net interest expense tal 28,942 Income before income taxes 392,288 Federal Income tax expense 131,303 Net income 260,985 Other expenses detail Schedule M-1 Tax Balance Increase (decrease) 12/31/2019 Warranty expense Supplies Miscellaneous Property insurance Telephone and internet Country Club Dues Meals Total other expenses Book balance 12/31/2019 23,912 9,523 3,750 16,464 14,793 10,000 17,000 95,442 Net interest expense Book balance Schedule M-1 Tax Balance 12/31/2019 Increase (decrease) 12/31/2019 Tax exempt interest income from state and local municipal bonc $ Bank interest expense (6,500) 35,442 Tota interest expense (net) $ 28,942 Note that "net" interest expense represents interest expense reduced by interest income