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 (This section may be helpful to fill out by hand first)

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 (This section may be helpful to fill out by hand first)

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

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)Form _ 162 Depreciation and Amortization OMB NO . 1545 - 0172 ( Including Information on Listed Property ) Department of the Treasury* I Attach to your tax return .\\ 20 18 internal Revenue Service ( 9.9 )| - GO to www. irs . gov / Form 4562 for instructions and the latest information . Attachment\\ Sequence No. 179 Name ( s ) shown on return* Business or activity to which this form relates* Identifying number* Election To Expense Certain Property Under Section 179 Note : If you have any listed property , complete Part V before you complete Part ! . Maximum amount ( see instructions ) . .` 1 Total cost of section 179 property placed in service ( see instructions )* 2 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 - O - .` 5 Dollar limitation for tax year . Subtract line 4 from line 1 . If zero or less , enter -O - . If married filing separately , see instructions* 5 ( 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 ?* 8 9 Tentative deduction . Enter the smaller of line 5 or line & .\\ 9 10 Carryover of disallowed deduction from line 13 of your 2017 Form 4562 . ' 10 1 1 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 1 1 12 13 Carryover of disallowed deduction to 2019 . Add lines 9 and 10 , less line 12 \\ 13 Note : Don't use Part II or Part I'll below for listed property . Instead , use Part V . FELL \\ 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 15 Property subject to section 168 ( 1) ( 1 ) election* 15 16 Other depreciation ( including ACRS )\\ 16 BELL !\\ MACRIS Depreciation ( Don't include listed property . See instructions . ) Section A 17 MACRIS deductions for assets placed in service in tax years beginning before 2018 .\\ 17 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 2018 Tax Year Using the General Depreciation System ( a ) Classification of property (b ) Month and year placed in` ( c ) Basis for depreciation \\ (d ) Recovery ( 7 ) Method service ( business/investment use \\ ( e ) Convention ( 9) Depreciation deduction only - see instructions ) period 19 2 3 - year property 6 5 - year property C 7 - year property $ 10 - year property @ 15 - year property $ 20 - year property 9 25 - year property 25 yrs . SIL 27.5 yrs . SIL WW ` Residential rental property 27.5 yrs . MM SIL i Nonresidential real 39 yrs . MM SIL property MM SIL Section C - Assets Placed in Service During 2018 Tax Year Using the Alternative Depreciation System 20 a Class life* SIL 6 12 - year 12 yrs . SIL C 30 - year 30 yrs . MM SIL WW $ 40 - year 40 Yrs .` SIL FELLIN` 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 23 For assets shown above and placed in service during the current year , enter the* portion of the basis attributable to section 263 A costs .\\ 23