Week 5 Assignment - Analyzing a Corporate Tax Return

Need serious help with this accounting assignment

Overview

You are a senior tax accountant in the firm, Ernest & Rainhouse. Joe, a new junior accountant, has just prepared his first corporate tax return for Zeus, Inc. The electronic filing system has rejected Zeus, Inc.'s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF] Download Zeus, Inc.'s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF]due to errors and omissions. Joe is seeking your help in determining his mistakes and in answering some corporate tax questions he is unsure about. You are to read the scenario below and then follow the instructions.

Scenario

Zeus, Inc. is organized as a corporation and is taxed as a C corporation with a calendar year-end. Zeus, Inc. owns and operates an amusement park in Los Angeles, California. Zeus, Inc.'s address, employer identification number (EIN), and date of incorporation are as follows:

Zeus, Inc. 77 Sunset Strip. Los Angeles, CA 90028. EIN: 56-1234567.

Date incorporated: July 1, 2010. Zeus, Inc. is owned by 77 shareholders. No person or entity owns directly 20% or more, or owns, directly or indirectly, more than 50% of the voting stock of Zeus, Inc. No one is from outside of the United States.

Zeus, Inc. uses the accrual method of accounting. Zeus, Inc. is not audited by a CPA firm. It does, however, use GAAP-based financial statements and has never had a restatement of its income statement.

Zeus, Inc. reported the following information for 2020:

Zeus, Inc. made payments that required it to file federal form(s) 1099. The 1099s were filed timely.

Zeus, Inc.'s average annual gross receipts for the prior three years are under $26,000,000.

Zeus, Inc. elects to file a complete Schedule M-3 even if only M-1, or a partial M-3, is required. Additional Information Used in the Preparation of Zeus, Inc. Financial Statements:

On August 1, 2020, Zeus, Inc. was notified by its legal counsel that Zeus, Inc. was being sued by a former employee regarding her termination of employment from Zeus, Inc. On December 21, 2020, a legal settlement was reached with this terminated employee. As part of the settlement, Zeus agreed to pay the employee a settlement amount of $190,000 on January 10, 2021. Zeus, Inc. accrued this expense on its 2020 financial statements.

Zeus, Inc. owns 12% of Fun Fair of Russia, a Russian corporation operating a theme park on the outskirts of Moscow. Fun Fair of Russia remitted dividends to Zeus, Inc. of $14,000. Zeus, Inc. also received $300 in dividends from holding marketable securities (all less than 20% owned by Zeus, Inc.).

From its inception until this year, Zip Coaster has been Zeus' main attraction, but it aged and lost appeal. Zeus, Inc. purchased a new attraction known as the Swirlwind. The Swirlwind was installed and placed in operation on March 1, 2020, at a cost of $6,000,000 to acquire and place into service.

Zeus, Inc. rents its amusement equipment from vendors. As of December 31, 2019, and December 31, 2020, respectively, Zeus, Inc. has prepaid vendors for equipment rental of $30,000 for January 2020 and $35,000 for January 2021. On December 26, 2020, Zeus, Inc. prepaid a contractor $17,500 to repair three pieces of maintenance shop equipment. Zeus, Inc. fully expects that the contractor will have completed the project by January 31, 2020. As of December 31, 2019, and 2020, respectively, Zeus, Inc. had vacation accruals on its books of $29,000 and $35,000. On December 2, 2020, Zeus, Inc. held an advertising giveaway of $100,000. Zeus, Inc. rents part of its unused land. Zeus, Inc. received a check for $50,000 on December 27, 2020, for a 6-month rental beginning January 1, 2021. The lease contains a clause that the rent is nonrefundable to the renter under any circumstances. During the year, Zeus, Inc. made the following estimated tax payments:

Estimated Tax Payments Date Federal Estimated Tax Payment California Estimated Tax Payment 4/15/2020 $72,500 $15,000 6/15/2020 $72,500 $15,000 9/15/2020 $72,500 $15,000 12/15/2020 $72,500 $15,000 . On December 1, 2020, Zeus Inc. paid $400,000 in dividends to all common stockholders.Officer Information % of Time Devoted to Name Social Security # % of Stock Owned Amount of Compensation Business Margo Harrington 123-45-6789 100% 05% $235,000 Dean Williams 987-65-4321 100% 03% $195,000 Dennis Johns 456-78-9321 100% 0% $165,000 Jamie Conway 321-45-6978 100% 0% $150,000Balance Sheet Zeus, Inc. Balance Sheet As of Dec. 31, 2019 As of Dec. 31, 2020 Assets: Cash 165,000 119,000 Accounts Receivable 128,000 75,000 Less: Allowance for Doubtful Accounts (43,000) (49,000) Inventory 422,000 390,000 Tax-exempt Securities 150,000 150,000 Publicly Traded Stocks 200,000 200,000 Fixed Assets 24,000,000 28,000,000 Less: Accumulated Depreciation (13,542,000) (12,892,000)Prepaid Insurance 25,000 Prepaid Rent 30,000 35,000 Prepaid Contractors 17,500 Other Assets 150,000 250,000 Total Assets 11,660,000 16,320,500 Liabilities & Stockholders' Equity: Accounts Payable 48,000 62,000 Accrued Wages 123,000 118,000 Accrued Bonuses 68,500 39,000 Accrued Vacation 29,000 35,000 Legal Settlement Accrual 190,000 Prize Accrual 100,000Notes Payable - Short Term 1,540,000 1,084,000 Notes Payable - Long Term 7,112,000 11,728,000 Capital Stock 100,000 100,000 Additional Paid-in Capital 2,000,000 2,000,000 Retained Earnings 639,500 814,500 Total Liabilities & Stockholders' Equity 11,660,000 16,320,500 Income Statement Zeus, Inc. Income Statement For the Year Ended December 31, 2020 Income: Sales 26,523,275 Less: Sales Returns & Allowances (113,500) Net Sales 26,409,775 Cost of Goods Sold (2,052,500) Gross Margin 24,357,275 Other Income: Dividend Income 14,300 Interest Income 2,650 Municipal Bond Interest Income 2,300 19,250Total Income: 24,376,525 Expenses: Employee Salaries 13,905,600 Repairs & Maintenance 492,350 Bad Debts 58,000 Rent 1,543,000 Payroll Taxes 1,112,400 Licensing Fees 10,750 Property Taxes 277,000 Interest Expense 781,000 Depreciation 1,350,000 Office Supplies 33,950 Employee Training 53,750e [ [ s e | [ e s | [ e e [ [ e Admission Supplies Attorney Fees Meals & Entertainment Travel Insurance Legal Settlement Prize Contest Expense Fuel Utilities 143,250 2,530,500 Telephone 135,250 Total Expenses Before Taxes 23,451,525 CA Income Tax Expense 60,000 Federal Tax Expense 290,000 Total Income Taxes 350,000 Net Income: 575,000OMB No. 1545-0123 Form 1120 U.S. Corporation Income Tax Return Department of the Treasury For calendar year 2020 or tax year beginning 1/1/2020 ... ending 12/31/2020 2020 Internal Revenue Service Go to www.irs.gov/Form1120 for instructions and the latest information. Check if: Name B Employer identification number 1a Consolidated return attach Form 851) ZEUS, INC 56-1234567 b Lifeonlife consoli- TYPE Number, street, and room or suite no. If a P.O. box, see instructions. C Date incorporated dated return . OR 77 SUNSET STRIP 2 Personal holding co PRINT City or town State ZIP code 7/1/2010 attach Sch. PH) . LOS ANGELES CA 90028 D Total assets (see instructions) 3 Personal service corp Foreign country name Foreign province/state/county Foreign postal code see instructions) 16.320.500 Schedule M-3 attached E Check it: (1) Initial return (2) Final return Name change (4) Address change la Gross receipts or sales 1a 6.523,275 b Returns and allowance . 1b 113.500 Balance. Subtract line 1b from line 1a 1c 26,409,775 Cost of goods sold (attach Form 1125-A) . 2,052,500 WNO 2 Gross profit. Subtract line 2 from line 1c . . 24.357.275 Dividends and inclusions (Schedule C, line 23) . 14,300 Income Interest . 2,650 Gross rents . 6 50,000 Gross royalties . . Capital gain net income (attach Schedule D (Form 1120)) . 8 Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . 9 Other income (see instructions-attach statement) . 10 Total income. Add lines 3 through 10 11 24,424,225 Compensation of officers (see instructions-attach Form 1125-E) 12 745,000 Salaries and wages (less employment credits) . 13 13, 157,600 Repairs and maintenance . 14 509,850 Bad debts . 15 52,000 Rents 16 1.543.000 Taxes and licenses . 17 1,460. 150 Interest (see instructions) . 18 781,000 Charitable contributions . 19 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) 20 7, 112,499 Depletion . 21 Deductions (See instructions for limitations on deductions. Advertising . 22 290,500 Pension, profit-sharing, etc., plans . 23 Employee benefit programs . 24 Reserved for future use . 25 Other deductions (attach statement) . 26 3,354,175 Total deductions. Add lines 12 through 26 . 27 29.005,774 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11 28 4,581,549 29a Net operating loss deduction (see instructions) . 29a Special deductions (Schedule C, line 24) . 29b 14, 150 Add lines 29a and 29b 290 14. 150 30 Taxable income. Subtract line 29c from line 28. See instructions 30 -4,595,699 31 Total tax (Schedule J, Part 1, line 11) 31 32 2020 net 965 tax liability paid (Schedule J, Part II, line 12) . 32 33 Total payments, credits, and section 965 net tax liability (Schedule J, Part III, line 23) . 33 290,000 and Payments Tax, Refundable Credit 34 Estimated tax penalty. See instructions. Check if Form 2220 is attached . 34 35 Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed 35 36 Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid 36 290,000 37 Enter amount from line 36 you want: Credited to 2021 estimated tax Refunded 37 290,000 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge Sign May the IRS discuss this return with Here the preparer shown below? See Signature of officer Date Title instructions. X Yes No Print/Type preparer's name Preparer's signature Date Check if PTIN Paid self-employed Preparer Firm's name Firm's EIN Use Only Firm's address Phone no City State ZIP code For Paperwork Reduction Act Notice, see separate instructions. Form 1120 (2020) HTAForm 1120 (2020) ZEUS, INC 56-1234567 Page 2 Schedule C Dividends, Inclusions, and Special Deductions (see (a) Dividends and (c) Special deductions instructions) inclusions (b) % (a) x (b) Dividends from less-than-20%-owned domestic corporations (other than debt-financed stock) . 300 50 150 2 Dividends from 20%-or-more-owned domestic corporations (other than debt-financed stock) 65 0 see 3 Dividends on certain debt-financed stock of domestic and foreign corporations . instructions 4 Dividends on certain preferred stock of less-than-20%-owned public utilities . 23.3 0 5 Dividends on certain preferred stock of 20%-or-more-owned public utilities 26.7 6 Dividends from less-than-20%-owned foreign corporations and certain FSCs. 50 7 Dividends from 20%-or-more-owned foreign corporations and certain FSCs . 65 8 Dividends from wholly owned foreign subsidiaries 100 0 see Subtotal. Add lines 1 through 8. See instructions for limitations . 300 instructions 150 Dividends from domestic corporations received by a small business investment company operating under the Small Business Investment Act of 1958 100 0 11 Dividends from affiliated group members . 100 0 12 Dividends from certain FSCs . 100 0 13 Foreign-source portion of dividends received from a specified 10%-owned foreign corporation (excluding hybrid dividends) (see instructions) . 14,000 100 14,000 14 Dividends from foreign corporations not included on line 3, 6, 7. 8, 11, 12, or 13 (including any hybrid dividends) . see 15 Section 965(a) inclusion . instructions 16a Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of the stock of a lower-tier foreign corporation treated as a dividend (attach Form(s) 5471) (see instructions) . 100 b Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s) 5471) (see instructions) . Other inclusions from CFCs under subpart F not included on line 15, 16a, 16b, or 17 (attach Form(s) 5471) (see instructions) 17 Global Intangible Low-Taxed Income (GILTI) (attach Form(s) 5471 and Form 8992) 18 Gross-up for foreign taxes deemed paid . 19 IC-DISC and former DISC dividends not included on line 1, 2, or 3 20 Other dividends 21 Deduction for dividends paid on certain preferred stock of public utilities 22 Section 250 deduction (attach Form 8993) . . 23 Total dividends and inclusions. Add column (a), lines 9 through 20. Enter here and on page 1. line 4 . 14,300 24 Total special deductions. Add column (c), lines 9 through 22. Enter here and on page 1, line 29b 14.150 Form 1120 (2020)Form 4562 Depreciation and Amortization OMB No. 1545-0172 (Including Information on Listed Property) 2020 Department of the Treasury Attach to your tax return. Attachment Internal Revenue Service (99) Go to www.irs.gov/Form4562 for instructions and the latest information. Sequence No. 179 Name(s) shown on return Business or activity to which this form relates Identifying number ZEUS, INC 1120 - AMUSEMENT PARK 56-1234567 Part I Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I 1 Maximum amount (see instructions) Total cost of section 179 property placed in service (see instructions). W N WN 3 Threshold cost of section 179 property before reduction in limitation (see instructions) . 4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- 0 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions 5 0 (a) Description of property (b) Cost (business use only) (c) Elected cost 7 Listed property. Enter the amount from line 29 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . 8 9 Tentative deduction. Enter the smaller of line 5 or line 8 9 10 Carryover of disallowed deduction from line 13 of your 2019 Form 4562. 10 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions . | 11 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 . . 12 13 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12 13 0 Note: Don't use Part II or Part Ill below for listed property. Instead, use Part V. Part II Special Depreciation Allowance and Other Depreciation (Don't include listed property. See instructions.) 14 Special depreciation allowance for qualified property (other than listed property ) placed in service during the tax year. See instructions . 14 6.000,000 15 Property subject to section 168(f)(1) election . . 15 16 Other depreciation (including ACRS) 16 Part III MACRS Depreciation (Don't include listed property. See instructions. Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2020 17 1, 112,499 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here Section B - Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (b) Month and (c) Basis for depreciation (a) Classification of property year placed business/investment use d) Recovery period (e) Convention (f) Method g) Depreciation deduction in service only-see instructions) 19 a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property f 20-year property g 25-year property 25 yrs S/L h Residential r 27.5 yrs. MM S/L property 27.5 yrs. MM S/L i Nonresidential real 39 yrs MM S/L property MM S/L Section C - Assets Placed in Service During 2020 Tax Year Using the Alternative Depreciation System 20 a Class life S/L b 12-year 12 yrs S/L c 30-year 30 yrs. MM S/L d 40-year 40 yrs. MM S/L Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28 21 22 Total. Add amounts from line 12, lines 14 through 17. lines 19 and 20 in column (9), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations-see instructions 22 7,112,499 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs 23 For Paperwork Reduction Act Notice, see separate instructions. Form 4562 (2020) HTAZEUS, INC 56-1234567 Line 26 (1120) - Other Deductions 1 Travel, Meals and Entertainment a Travel 1a 13,550 c Meals, subject to 50% limit . 8.500 f Less disallowed 4,250 g Subtract line f from lines b, c, d and e . 4,250 2 ATTORNEY FEES 10,000 3 INSURANCE AWNE 240,000 4 FUEL 158,675 5 OFFICE SUPPLIES 33,950 6 TELEPHONE 135,250 7 UTILITIES 2,530,500 8 ADMISSIONS SUPPLIES 143,250 9 EMPOLYEE TRAINING 53,750 10 SAFETY EXPENSES 31,000 1 Total other deductions . . . 3,354,175 12 Total deductions less expenses for offsetting credits 12 3,354,175 Line 6, Sch L (1120) - Other Current Assets Beginning End 1 PUBLICLY TRADED STOCKS 200,000 200,000 Total other current assets 200,000 200,000 Line 14, Sch L (1120) - Other Assets Beginning End 1 PREPAID INSURANCE 0 25,000 2 PREPAID RENT 30,000 35,000 3 PREPAID CONTRACTORS 0 17,500 OTHER ASSETS 150,000 250,000 Total other assets 180,000 $27.500 Line 18, Sch L (1120) - Other Current Liabilities Beginning End 1 ACCRUED WAGES 123,000 118,000 2 ACCRUED BONUSES 38,500 39,000 ACCRUED VACATION 29,000 35,000 Total other current liabilities 220.500 192,000 Line 21, Sch L (1120) - Other Liabilities Beginning End 1 LEGAL SETTLEMENT ACCRUAL 190,000 2 PRIZE ACCRUAL oooo 00,000 AWN - 3 UNEARNED RENTAL REVENUE 50,000 4 Total other liabilities 340,000ZEUS, INC 56-1234567 Part II, Line 25 (Sch M-3 (1120)) - Other Income (Loss) Items with Differences 50,000 0 50,000 Income per Temporary Permanent ncome (Loss) per Item Income Statement Difference Difference Tax Return 1 RENT 0 50,000 50,000 Part III, Line 38 (Sch M-3 (1120)) - Other Expense/Deduction Items with Differences 13,970,450 -60,50 -2,500 13,907,450 Expense per emporary ermanen Deduction pe Item Income Statement Difference Difference Tax Return 1 INSURANCE 215,000 25,000 240,000 2 POLITICAL CONTRIBUTIONS 2,500 -2,500 3 PRIZE CONTEST EXPENSE 100,000 -100,000 4 REAPIRS 192,350 17,50 509,850 5 SALARIES & WAGES 13, 160,600 -3,000 13, 157,600Form 1120 (2020) ZEUS, INC 56-1234567 Page 3 Schedule J Tax Computation and Payment (see instructions Part I-Tax Computation 1 Check if the corporation is a member of a controlled group (attach Schedule O (Form 1120)). See instructions 2 Income tax. See instructions . 2 3 Base erosion minimum tax amount (attach Form 8991) . 3 4 Add lines 2 and 3 . . 0 Foreign tax credit (attach Form 1118) . 5a b Credit from Form 8834 (see instructions) . 5b General business credit (attach Form 3800) 5c Credit for prior year minimum tax (attach Form 8827) 5d Bond credits from Form 8912 . . 5e Total credits. Add lines 5a through 5e 6 Subtract line 6 from line 4 7 8 Personal holding company tax (attach Schedule PH (Form 1120)). 8 3a Recapture of investment credit (attach Form 4255) . 9a b Recapture of low-income housing credit (attach Form 8611) . 9b C Interest due under the look-back method-completed long-term contracts (attach Form 8697) . 9c Interest due under the look-back method-income forecast method (attach Form 8866) 9d Alternative tax on qualifying shipping activities (attach Form 8902) . ge f Interest/tax due under Section 453A(c) and/or Section 453(1) . 9f g Other (see instructions-attach statement) . 9q 10 Total. Add lines 9a through 9g . . . 10 11 Total tax. Add lines 7. 8. and 10. Enter here and on page 1, line 31 11 Part II-Section 965 Payments (see instructions) 12 2020 net 965 tax liability paid from Form 965-B. Part II, column (k). line 4. Enter here and on page 1. line 32 12 Part III-Payments, Refundable Credits, and Section 965 Net Tax Liability 13 2019 overpayment credited to 2020 . 13 14 2020 estimated tax payments . 14 290,000 15 2020 refund applied for on Form 4466 16 Combine lines 13, 14, and 15. 16 290,000 17 Tax deposited with Form 7004 . | 17 18 Withholding (see instructions) 18 19 Total payments. Add lines 16, 17, and 18 . 19 290,000 20 Refundable credits from: a Form 2439 . . 20a b Form 4136 . . . 20b C Reserved for future use . 20c d Other (attach statement-see instructions) . 20d 21 Total credits. Add lines 20a through 20d . 21 22 2020 net 965 tax liability from Form 965-B, Part I, column (d), line 4. See instructions . 22 23 Total payments, credits, and section 965 net tax liability. Add lines 19, 21, and 22. Enter here and on page 1. line 33 23 290,000 Form 1120 (2020)Form 1120 (2020) ZEUS. INC 56-1234567 Page 4 Schedule K Other Information (see instructions 1 2 10 1 12 b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in any foreign or domestic partnership Check accounting method: a D Cash b Accrual c EI Other (specify) Yes | No See the instructions and enter the: Business activity code no. 713100 b Business activity AMUSEMENT PARK T e L S Product or service AMUSEMENTPARK e Is the corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group? . B o B RE R O B e X If "Yes," enter name and EIN of the parent corporation o At the end of the tax year: Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or tax-exempt organization own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation's stock entitled to vote? If "Yes," complete Part | of Schedule G (Form 1120) (attach Schedule G) . X Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all . classes of the corporation's stock entitled to vote? If "Yes," complete Part |l of Schedule G (Form 1120) (attach Schedule G) . . . . . X At the end of the tax year, did the corporation: Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of stock entitied to vote of any foreign or domestic corporation not included on Form 851, Affiliations Schedule? For rules of constructive ownership, see instructions. X If "Yes," complete (i) through (iv) below. - (ii) Employer i C (iv) Percentage (i) Name of Corporation Identification Number (' ) ountry o Owned in Voting fan ncorporation Stock (including an enlity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If "Yes." complete (i) through (iv) below. > (ii) Employer i) C s (iv) Maximum (i) Name of Entity Identification Number (Or) az:lznat{?;: Percentage Owned in if an 9 Profit, Loss, or Capital During this tax year, did the corporation pay dividends (other than stock dividends and distributions in exchange for stock) in excess of the corporation's current and accumulated earnings and profits? See sections 301and316. . . . . . . . . . . . . | X If "Yes," file Form 5452, Corporate Report of Nondividend Distributions. See the instructions for Form 5452. If this is a consolidated return, answer here for the parent corporation and on Form 851 for each subsidiary. At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of the total voting power of all classes of the corporation's stock entitled to vote or at least 25% of the total value of all classes of the corporation's stock?. . . . . X For rules of attribution, see section 318, If "Yes," enter: (a) Percentage owned and (b) Owner'scountry (c) The corporation may have to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Enter the number of Forms 5472 attached P Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . . . . . . . D If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Enter the amount of tax-exempt interest received or accrued during the tax year P $ Enter the number of shareholders at the end of the tax year (if 100 or fewer) P If the corporation has an NOL for the tax year and is electing to forego the carryback period, check here (see instructions) > D If the corporation is filing a consolidated return, the statement required by Regulations section 1.1502-21(b)(3) must be attached or the election will not be valid. Enter the available NOL carryover from prior tax years (do not reduce it by any deduction reported on page B OERER, . L o e ot e GRS aE At e e . B i B LG I Form 1120 (2020) Form 1120 (2020) ZEUS, INC 56-1234567 Page 5 Schedule K Other Information (continued from page 4) 13 Are the corporation's total receipts (page 1, line 1a, plus lines 4 through 10) for the tax year and its total assets at the end of the Yes No tax year less than $250,000? . If "Yes," the corporation is not required to complete Schedules L, M-1, and M-2. Instead, enter the total amount of cash distributions and the book value of property distributions (other than cash) made during the tax year $ Is the corporation required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement? See instructions If "Yes," complete and attach Schedule UTP. 15a Did the corporation make any payments in 2020 that would require it to file Form(s) 1099? . . X b If "Yes," did or will the corporation file required Form(s) 1099?. X 16 During this tax year, did the corporation have an 80% -or- more change in ownership, including a change due to redemption of its own stock? . X 17 During or subsequent to this tax year, but before the filing of this return, did the corporation dispose of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction? . X 18 Did the corporation receive assets in a section 351 transfer in which any of the transferred assets had a fair market basis or fair market value of more than $1 million? . 19 During the corporation's tax year, did the corporation make any payments that would require it to file Forms 1042 and 1042-S under chapter 3 (sections 1441 through 1464) or chapter 4 (sections 1471 through 1474) of the Code? . 20 Is the corporation operating on a cooperative basis? . X 21 During the tax year, did the corporation pay or accrue any interest or royalty for which the deduction is not allowed under section 267A? See instructions . If "Yes," enter the total amount of the disallowed deductions 22 Does the corporation have gross receipts of at least $500 million in any of the 3 preceding tax years? (See sections 59A(e)(2) and (3)) . X If "Yes," complete and attach Form 8991. 23 Did the corporation have an election under section 163(j) for any real property trade or business or any farming business in effect during the tax year? See instructions . . X 24 Does the corporation satisfy one or more of the following? See instructions . X a The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense. b The corporation's aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the current tax year are more than $26 million and the corporation has business interest expense. c The corporation is a tax shelter and the corporation has business interest expense. If "Yes," complete and attach Form 8990 25 Is the corporation attaching Form 8996 to certify as a Qualified Opportunity Fund? . X If "Yes," enter amount from Form 8996, line 15. $ 26 Since December 22, 2017, did a foreign corporation directly or indirectly acquire substantially all of the properties held directly or ndirectly by the corporation, and was the ownership percentage (by vote or value) for purposes of section 7874 greater than 50% (for example, the shareholders held more than 50% of the stock of the foreign corporation)? If "Yes," list the ownership percentage by vote and by value. See instructions . Percentage: By Vote By Value Form 1120 (2020)Form 1120 (2020) ZEUS, INC 56-1234567 Page 6 Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets a ) b) c) (d) Cash . 165,000 119,000 2a Trade notes and accounts receivable . 128,000 75,000 b Less allowance for bad debts 43,000) 85,000 49,000) 26,000 3 Inventories 422,000 390.000 U.S. government obligations . 150,000 150,000 Tax-exempt securities (see instructions) . INOUR Other current assets (attach statement) 200,000 200,000 Loans to shareholders , 8 Mortgage and real estate loans . 9 Other investments (attach statement) . 10a Buildings and other depreciable assets 24,000,000 28,000.000 b Less accumulated depreciation . 13,542,000) 10,458,000 12.892,000) 15, 108,000 11a Depletable assets . b Less accumulated depletion . 0 2 Land (net of any amortization). 13a Intangible assets (amortizable only) . Less accumulated amortization . 0 0 14 Other assets (attach statement) 180,000 327,500 15 Total assets 11,660,000 16,320.500 Liabilities and Shareholders' Equity 16 Accounts payable 48,000 62,000 17 Mortgages, notes, bonds payable in less than 1 year 18 Other current liabilities (attach statement) . 220,500 192,000 19 Loans from shareholders . 20 Mortgages, notes, bonds payable in 1 year or more 8,652,000 12.812,000 21 Other liabilities (attach statement) . 340,000 22 Capital stock: a Preferred stock b Common stock . 100,000 100,000 100,000 100,000 23 Additional paid-in capital . 2,000,000 2,000,000 24 Retained earnings-Appropriated (attach statement) . 25 Retained earnings-Unappropriated 639,500 814,500 26 Adjustments to shareholders' equity (attach statement) . 27 Less cost of treasury stock . . 28 Total liabilities and shareholders' equity . 11,660,000 16,320.500 Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. Net income (loss) per books 7 Income recorded on books this year not Federal income tax per books . included on this return (itemize): W N Excess of capital losses over capital gains . Tax-exempt interest A Income subject to tax not recorded on books this year (itemize) 0 0 8 Deductions on this return not charged Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): a Depreciation a Depreciation S b Charitable contributions $ b Charitable contributions . S Travel and entertainment S 0 9 Add lines 7 and 8 0 6 Add lines 1 through 5 0 10 Income (page 1, line 28)-line 6 less line 9 0 Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Schedule L, Line 25) Balance at beginning of year 639.500 5 Distributions: a Cash 400,000 Net income (loss) per books . 575,000 b Stock W N Other increases (itemize): c Property 6 Other decreases (itemize): 0 7 Add lines 5 and 6 400,000 Add lines 1, 2, and 3 1.214.500 8 Balance at end of year (line 4 less line 7) 814.500 Form 1120 (2020)Form 1125-A Cost of Goods Sold (Rev. November 2018) OMB No. 1545-0123 Department of the Treasury Attach to Form 1120, 1120-C, 1120-F, 1120S, or 1065. Internal Revenue Service Go to www.irs.gov/Form1125A for the latest information. Name Employer identification number ZEUS, INC 56-123456 Inventory at beginning of year . 1 422,000 Purchases . 2,020,500 Cost of labor . . Additional section 263A costs (attach schedule) . CONQUAWN Other costs (attach schedule) . Total. Add lines 1 through 5 2,442,500 Inventory at end of year . . 390,000 Cost of goods sold. Subtract line 7 from line 6. Enter here and on Form 1120, page 1, line 2 or the appropriate line of your tax return. See instructions . 2,052,500 Ba Check all methods used for valuing closing inventory: i X Cost ")Lower of cost or market 1#) Other (Specify method used and attach explanation.) b Check if there was a writedown of subnormal goods . . c Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) . d If the LIFO inventory method was used for this tax year, enter amount of closing inventory computed under LIFO . If property is produced or acquired for resale, do the rules of section 263A apply to the entity? See instructions . X Yes No Was there any change in determining quantities, cost, or valuations between opening and closing inventory? If "Yes," attach explanation . Yes X No For Paperwork Reduction Act Notice, see instructions. Form 1125-A (Rev. 11-2018) HTASCHEDULE M-3 Net Income (Loss) Reconciliation for Corporations (Form 1120) With Total Assets of $10 Million or More OMB No. 1545-0123 Rev. December 2019) Department of the Treasury Attach to Form 1120 or 1120-C. Internal Revenue Service Go to www.irs.gov/Form1120 for instructions and the latest information. Name of corporation (common parent, if consolidated return) Employer identification number ZEUS, INC 56-1234567 Check applicable box(es): (1) X Non-consolidated return (2) Consolidated return (Form 1120 only) (3) Mixed 1120/L/PC group (4) Dormant subsidiaries schedule attached Part I Financial Information and Net Income (Loss) Reconciliation (see instructions) 1a Did the corporation file SEC Form 10-K for its income statement period ending with or within this tax year? Yes. Skip lines 1b and 1c and complete lines 2a through 11 with respect to that SEC Form 10-K. X No. Go to line 1b. See instructions if multiple non-tax-basis income statements are prepared. b Did the corporation prepare a certified audited non-tax-basis income statement for that period? Yes. Skip line 1c and complete lines 2a through 11 with respect to that income statement. X No. Go to line 1c. C Did the corporation prepare a non-tax-basis income statement for that period? Yes. Complete lines 2a through 11 with respect to that income statement. X No. Skip lines 2a through 3c and enter the corporation's net income (loss) per its books and records on line 4a. 2a Enter the income statement period Beginning 1/1/2020 Ending 12/31/2020 b Has the corporation's income statement been restated for the income statement period on line 2a? Yes. (If "Yes," attach an explanation and the amount of each item restated.) X No. C Has the corporation's income statement been restated for any of the five income statement periods immediately preceding the period on line 2a? Yes. (If "Yes," attach an explanation and the amount of each item restated.) X No. 3a Is any of the corporation's voting common stock publicly traded? Yes. X No. If "No," go to line 4a. Enter the symbol of the corporation's primary U.S. publicly traded voting common stock . C Enter the nine-digit CUSIP number of the corporation's primary publicly traded voting common stock 4a Worldwide consolidated net income (loss) from income statement source identified in Part I, line 1 . 4a 575,000 b Indicate accounting standard used for line 4a (see instructions): (1) X GAAP (2) IFRS (3) Statutory (4) Tax-basis (5) Other (specify) a Net income from nonincludible foreign entities (attach statement) . 5a b Net loss from nonincludible foreign entities (attach statement and enter as a positive amount) . 5b a Net income from nonincludible U.S. entities (attach statement) . 6a b Net loss from nonincludible U.S. entities (attach statement and enter as a positive amount) 6b a Net income (loss) of other includible foreign disregarded entities (attach statement) . 7a b Net income (loss) of other includible U.S. disregarded entities (attach statement) . 7b C Net income (loss) of other includible entities (attach statement). 7c 8 Adjustment to eliminations of transactions between includible entities and nonincludible entities (attach statement) 8 9 Adjustment to reconcile income statement period to tax year (attach statement). 9 10a Intercompany dividend adjustments to reconcile to line 11 (attach statement) . 10a b Other statutory accounting adjustments to reconcile to line 11 (attach statement) 10b c Other adjustments to reconcile to amount on line 11 (attach statement). 10c 11 Net income (loss) per income statement of includible corporations. Combine lines 4 through 10 11 575,000 Note: Part I, line 11, must equal Part II, line 30, column (a), or Schedule M-1, line 1 (see instructions). 12 Enter the total amount (not just the corporation's share) of the assets and liabilities of all entities included or removed on the following lines. Total Assets Total Liabilities a Included on Part I, line 4 . 16,320,500 13,406,000 Removed on Part I, line 5 . Removed on Part I, line 6 Included on Part I, line 7 For Paperwork Reduction Act Notice, see the Instructions for Form 1120. Schedule M-3 (Form 1120) (Rev. 12-2019) HTASchedule M-3 (Form 1120) (Rev. 12-2019) Page 2 Name of corporation (common parent, if consolidated return) Employer identification number ZEUS, INC 56-1234567 Check applicable box(es) (1) Consolidated group (2) Parent corp (3) Consolidated eliminations (4) Subsidiary corp (5) Mixed 1120/L/PC group Check if a sub-consolidated (6) 1120 group (7) 1120 eliminations Name of subsidiary (if consolidated return) Employer identification number Part II Reconciliation of Net Income (Loss) per Income Statement of Includible Corporations With Taxable Income per Return (see instructions) Income (Loss) Items (a) (b) (c) (d) Income (Loss) per Temporary Permanent Income (Loss) (Attach statements for lines 1 through 12) Income Statement Difference Difference per Tax Return Income (loss) from equity method foreign corporations . Gross foreign dividends not previously taxed 14,000 14,000 Subpart F. QEF, and similar income inclusions Gross-up for foreign taxes deemed paid DO YOUIAWN- Gross foreign distributions previously taxed . Income (loss) from equity method U.S. corporations . U.S. dividends not eliminated in tax consolidation . 300 300 Minority interest for includible corporations . Income (loss) from U.S. partnerships . 10 Income (loss) from foreign partnerships . 11 Income (loss) from other pass-through entities. 12 Items relating to reportable transactions . 13 Interest income (see instructions). 4,950 2,300) 2,650 14 Total accrual to cash adjustment . 15 Hedging transactions 16 Mark-to-market income (loss) . 17 Cost of goods sold (see instructions). 2,052,500) 2,052,500) 18 Sale versus lease (for sellers and/or lessors) 19 Section 481(a) adjustments . 20 Unearned/deferred revenue . Income recognition from long-term contracts . Original issue discount and other imputed interest . 23a Income statement gain/loss on sale, exchange, abandonment, worthlessness, or other disposition of assets other than inventory and pass-through entities . Gross capital gains from Schedule D, excluding amounts from pass-through entities . C Gross capital losses from Schedule D, excluding amounts from pass-through entities, abandonment osses, and worthless stock losses Net gain/loss reported on Form 4797, line 17, excluding amounts from pass-through entities, abandonment losses, and worthless stock losses . e Abandonment losses . f Worthless stock losses (attach statement) . . g Other gain/loss on disposition of assets other than inventory 24 Capital loss limitation and carryforward used. 25 Other income (loss) items with differences (attach statement) 50,000 50,000 26 Total income (loss) items. Combine lines 1 through 25 . 2,033,250) 50,000 2,300) ( 1,985,550) 27 Total expense/deduction items (from Part III, line 39) 16,712,950) ( 5,505,999) 301,750( 21,917,199) 28 Other items with no differences . 19,321,200 19,321,200 29a Mixed groups, see instructions. All others, combine ines 26 through 28 675,000 5,455,999) 299.450 4.581,549) b PC insurance subgroup reconciliation totals. c Life insurance subgroup reconciliation totals . 30 Reconciliation totals. Combine lines 29a through 29c 575,000( 5.455,999 299,450 ( 4,581,549) Note: Line 30, column (a), must equal Part I. line 11, and column (d) must equal Form 1120, page 1, line 28 Schedule M-3 (Form 1120) (Rev. 12-2019)Schedule M-3 (Form 1120) (Rev. 12-2019) Page 3 Name of corporation (common parent, if consolidated return) Employer identification number ZEUS, INC 56-1234567 Check applicable box(es) (1) Consolidated group (2) Parent corp (3) Consolidated eliminations (4) Subsidiary corp (5) Mixed 1120/L/PC group Check if a sub-consolidated (6) 1120 group (7) 1120 eliminations Name of subsidiary (if consolidated return Employer identification number Part III Reconciliation of Net Income (Loss) per Income Statement of Includible Corporations With Taxable Income per Return-Expense/Deduction Items (see instructions (a) (b) (c) (d) Expense/Deduction Items Expense per Temporary Permanent Deduction per Income Statement Difference Difference Tax Return 1 U.S. current income tax expense . 290,000 290,000) U.S. deferred income tax expense W N State and local current income tax expense 60,000 60,000 State and local deferred income tax expense Foreign current income tax expense (other than foreign withholding taxes) 6 Foreign deferred income tax expense Foreign withholding taxes . Interest expense (see instructions) 781,000 781,000 Stock option expense . 10 Other equity-based compensation . 11 Meals and entertainment . 8,500 4.250 4.250 Fines and penalties . 5,000 5,000) 13 Judgments, damages, awards, and similar costs 190,000 190,000) 14 Parachute payments . 15 Compensation with section 162(m) limitation . 16 Pension and profit-sharing . 17 Other post-retirement benefits . 18 Deferred compensation . 19 Charitable contribution of cash and tangible property 20 Charitable contribution of intangible property . 21 Charitable contribution limitation/carryforward 22 Domestic production activities deduction (see instructions) . 23 Current year acquisition or reorganization investment banking fees . 24 Current year acquisition or reorganization legal and accounting fees 25 Current year acquisition/reorganization other costs 26 Amortization/impairment of goodwill . 27 Amortization of acquisition, reorganization, and start-up costs . 28 Other amortization or impairment write-offs . 29 Reserved . 30 Depletion . 31 Depreciation . ,350,000 5,762.499 7, 112,499 32 Bad debt expense . 58,000 ( 6,000) 52,000 33 Corporate owned life insurance premiums 34 Purchase versus lease (for purchasers and/or lessees) 35 Research and development costs 36 Section 118 exclusion (attach statement) 37 Section 162(r)-FDIC premiums paid by certain large financial institutions (see instructions) 38 Other expense/deduction items with differences (attach statement) . . 13,970,450 60,500) ( 2,500 13,907.450 39 Total expense/deduction items. Combine lines 1 through 38. Enter here and on Part II, line 27. reporting positive amounts as negative and negative amounts as positive 16.712,950 5.505,999 301,750 21,917. 199 Schedule M-3 (Form 1120) (Rev. 12-2019)