Wolf P. is an eclectic family pizza & pasta restaurant that is wholly owned by John and Allie Ryan opened in tax year 2017, and now in its second year of operation. The business is organized as a C-Corporation under the name Wolf P. Inc. Their EIN is 904713872 The Ryan's files the tax information for the operations of the business on Form 1120. Wolf P. uses the accrual method of accounting. The restaurant has been very successful because of its reasonable pricing and family-friendly environment. The restaurant is also unique as patrons are given the dough and food items and can prepare their own pizzas that are then taken back for baking by the service staff. The do-it-yourself food prep is optional, but a huge hit with families and contributes to the success of the establishment.

I. Revenues-Form 1120

Wolf P.'s total cash sales in 2014 $805,398 and its total credit card charges through December 29, 2018 were $1,554,874. In addition, Wolf P. also hosted a party on December 31, 2018. They could have picked up the check totaling $10,000 at 7PM on December 31 but they did not pick up the check until 2:30AM on January 1.

IV. Expenses

a. Employee Salaries & Benefits

John works full time managing Wolf P. , and he pays himself with a form W2. The restaurant had 9 full time employees. Total wages paid for the year was $734,486. Total benefits were 140,000. Included in this figure are wages and benefits for the food preparation staff for 3 employees, which totaled 75,437 for wages and 15,000 for benefits.

John has health insurance coverage for himself and his nine employees, at a cost of $100,000.

Vehicle

The business provides John with a Lexus, purchased in 2018. John uses the actual method to compute expenses. The vehicle is only used for business purposes. Total gas and maintenance receipts totaled $2,534. In addition, the payment of the vehicle was $1,841 per month at 0% APR.

b. Food and Supplies Inventory

Wolf P. gets all its food and food supplies from the same supplier. It placed and used $496,541 in food and food supplies for the year. All such purchases were made on account and payable within 15 days and Wolf P.'s outstanding and unpaid invoices on December 31st totaled $0. Due to an end of the year party, they depleted their entire inventory.

Other Expenses

Wolf P. paid a $1,500 fine from the health department for three health code violations. They properly recorded this on their books.

Wolf P. also bribed the health inspector for $33,500 to ignore 12 critical violations. They recorded this on their books in the "miscellaneous" account.

Wolf P. also paid out the following in 2018, and properly recorded this per books:

Merchant Account Fees$48,425

General liability and property insurance$77,000

Electric & Gas Bills$19,135

Legal & Accounting Fees$5,700

Advertisement Fees$13,250

Charitable Contributions$100,000

Entertainment Expenses$10,000

Meals$50,000

c. Estimated Tax Payments

John made estimated tax payments every quarter of the tax year. He paid $40,000 per quarter; totaling $120,000 for the tax year. Please do not calculate any underpayment penalties.

V.Assets Acquired in 2017

Wolf P. purchased the following assets, all placed in service on 01/01/2017. Wolf P, Inc. has elected out of Bonus Depreciation.

AssetCostProperty ClassSection 179 takenMACRS 2017MACRS 2018

New Kitchen Equipment$350,000

Furniture$35,000

Computers and software$12,000

Food Truck (not luxury)$24,000

VI.Assets Acquired in 2018

Wolf P. purchased the following assets, all placed in service on 6/30/2018. TRPP, Inc. has elected out of Bonus Depreciation.

AssetCostProperty ClassSection 179 takenMACRS 2018

New Dishwasher$45,000

2018 Lexus.$100,000

VII.Income statement prepared for book purposes

Income Statement

for the year ended Dec 31, 2018

Revenues:

Cash and Check Sales$815,398.00

Credit Card Sales1,554,874.00

Less: COGS(496,541.00)

Municipal Bond Interest15,000.00

Total Revenues1,888,731.00

Total Revenues1,888,731.00

Less: Total Expenses before taxes1,385,530.00

Net Income before taxes503,201.00

Less: Income tax expense117,222.21

Net Income385,978.79

Form ] TIZ0 - UN Estimated Tax for Corporations (WORKSHEET For calendar year 2019 , or tax year beginning OMB NO . 1545- 012 . 2018 , and ending OZ ' Department of the Treasury Internal Revenue Service D Go to www . irs . gov / Form 7 120W/ for instructions and the latest information . - Keep for the corporation's records - Do not send to the Internal Revenue Service 2019 Estimated Tax Computation 1 Taxable income expected for the tax year 2 Multiply line 1 by 21 % ( 0. 21 ) .` 3 Tax credits . See instructions . Subtract line 3 from line 2 5 Other taxes . See instructions 6 Total tax . Add lines 4 and 5 . 7 Credit for federal tax paid on fuels and other refundable credits . See instructions\\ 8 Subtract line 7 from line 6 . Note : If the result is less than $500 , the corporation is not required to make estimated tax payments .\\ 92 Enter the tax shown on the corporation's 2018 tax return . See instructions . Caution : If the tax is zero or the tax year was for less than 12 months , skip this line and enter the amount from line & on line 96 .` 9:2 bo Enter the smaller of line & or line 92 . If the corporation is required to skip line 92 , enter the amount from line & .\\ 90 ( P ) 10 Installment* due dates . See instructions* 10 17 Required installments .\\ Enter 25% Of line 96 in columns ( a ) through ( d) . If the corporation uses the annualized income installment method or adjusted seasonal installment method or is a " large corporation ," see the instructions for the amount to enter*SCHEDULES M-1 and M-2 (Form 1120-F) Reconciliation of Income (Loss) and Analysis of OMB No. 1545-0123 Unappropriated Retained Earnings per Books Department of the Treasury Internal Revenue Service Go to www.irs.gov/Form1 120F for the latest information. 2018 Name of corporation Attach to Form 1120-F. Employer identification number 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 . Income recorded on books this year Federal income tax per books W N not included on this return (itemize): Excess of capital losses over capital gains a Tax-exempt interest $ Income subject to tax not recorded on b Other (itemize): books this year (itemize): 8 Deductions on this return not charged 5 Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): Depreciation $ a Depreciation . b Charitable contributions Charitable contributions c Other (itemize): c Travel and entertainment d Other (itemize): 9 Add lines 7 and 8 . 6 Add lines 1 through 5 10 Income-line 6 less line 9 Schedule M-2 Analysis of Unappropriated Retained Earnings per Books Balance at beginning of year 5 Distributions: a Cash N Net income (loss) per books . b Stock Other increases (itemize): c Property 6 Other decreases (itemize): 7 Add lines 5 and 6 . Add lines 1, 2, and 3 8 4 Balance at end of year (line 4 less line 7)