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Taxable Income Before Charitable Contribution

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					Tab: Tax Return Prob-2009                    File: ebc53cb3-60f9-4cbc-b2be-6030f79adb95.xls.                                  Page 1 of 3

        Corporate Tax Return Problem
                                                                                                  December 31, 2009
        Cash                                                                                       24,000
        Accounts receivable                                                                        48,000
        Investment in IBM Stock                                                                   100,000
        Investment in North Carolina Bonds (7%)                                                   200,000
        Fixed assets                                                                              200,000
        Accumulated depreciation                                                                                 16,000
        Accounts payable                                                                                         70,000
        Capital stock                                                                                           400,000
        Retained earnings
        Service revenue                                                                                           600,000
        Dividend income                                                                                            10,000
        Interest income                                                                                            14,000
        Salary expense for employees                                                               300,000
        Payroll taxes                                                                               29,000
        Bad debts expense (Note 1)                                                                   5,000
        N. C. Corp. estimated income taxes - 2009                                                   12,000
        Federal Corp. estimated income taxes - 2009                                                 40,000
        Rent expense                                                                                73,000
        Depreciation expense (Note 2)                                                               16,000
        Entertainment expenses                                                                      18,000
        Capital loss                                                                                15,000
        Charitable Contribution                                                                     30,000
        Trial Balance Total                                                                    $ 1,110,000   $ 1,110,000
        Total Revenue                                                                                             624,000
        Total Expenses                                                                             538,000
        Net income per books                                                                        86,000
        Note 1. The company uses the direct write-off method for bad debts.
        Note 2. Depreciation for tax purposes is $20,000
          Net income (loss) per books                                                                        $     86,000
          Bad Debts
          Charitable Contribution                                                                            $      30,000
          Tax-exempt Interest                                                                                      (14,000)
          Federal Income Tax                                                                                        40,000
          Excess Capital Losses                                                                                     15,000
          Travel and Entertainment (50%)                                                                             9,000
          Depreciation Expense                                                                                      (4,000)
          Base for Charitable Contribution Limit                                                                   162,000
          Limit on Charity Deduction (10%)                                                                          16,200
          Actual Contributions                                                                                      30,000
          Carryover                                                                                                 13,800
          Taxable income before Charity & Dividend Received Deduction                                              162,000
          Charitable contribution deduction                                                                        (16,200)
          Taxable Income before Dividend Received Deduction                                                        145,800
          Dividends received deduction (70%)                                                                        (7,000)
          Taxable income                                                                                           138,800
          Income Tax Computation                             50,000                                    15%        7,500.00
                                                             25,000                                    25%        6,250.00
                                                             25,000                                    34%        8,500.00
                                                             38,800                                    39%       15,132.00
          Income tax                                        138,800                                              37,382.00
   Tab: 1120-front                                 File: ebc53cb3-60f9-4cbc-b2be-6030f79adb95.xls                     Page 2 of 3

Name:________________________                                          Student ID Number

Class ________ Row:_________


 1120                 U.S. Corporation Income Tax Return                                                                2009
       1a         Gross Receipts            600,000.00               b. Less: Returns             Bal 1c  600,000.00
       2          Cost of Goods Sold………..……………………..………………………………………………………                               2
       3          Gross Profit. Subtract line 2 from line 1c………..……………………..………………………………………………………       3  600,000.00
       4          Dividends………..……………………..………………………………………………………                                        4   10,000.00
       5          Interest………..……….………………..………………………………………………………                                       5
       6          Gross Rents…...……..……………………..……………………………………………………… 6
       7          Gross royalties………..……………………..……………………………………………………… 7
       8          Capital gain net income (Attach Schedule D (Form 1120))………..……………………..………………………………………8
       9          Net gain or (loss) from Form 4797, Part II, Line 17………..……………………..……………………………………………… 9
       10         Other Income………..……………………..……………………………………………………… 10
       11         Total Income………..……………………..……………………………………………………… 11                                     610,000.00
       12         Compensation of officers………..……………………..………………………………………………………                        12
       13         Salaries and Wages………..……………………..……………………………………………………… 300,000.00                   13
       14         Repairs and Maintenance………..……………………..………………………………………………………                         14
       15         Bad debts………..……………………..………………………………………………………                                       15    5,000.00
       16         Rents…………….......……………………..……………………………………………………… 16                                      73,000.00
       17         Taxes and licenses………..……………………..………………………………………………………                              17   41,000.00
       18         Interest…………...……...………………..………………………………………………………                                   18
       19         Charitable contributions………..……………………..………………………………………………………16,200.00               19
       20         Depreciation (attach form 4562) not claimed on Schedule or elsewhere ………..……………………..………………………
                                                                                                      20   20,000.00
       21         Depletion…….……..……………………..………………………………………………………                                     21
       22         Advertising………..……………………..………………………………………………………                                     22
       23         Pension, profit-sharing, etc………..……………………..………………………………………………………                    23
       24         Employee benefit plans………..……………………..………………………………………………………                          24
       25         Domestic production activities deduction (attach Form 8903) ………...………………..          25
       26         Other Deductions………..……………………..………………………………………………………                                26    9,000.00
       27         Total Deductions (Add lines 12 through 26)………..……………………..……………………………………………………       27  464,200.00
       28         Taxable income before net operating loss and special deductions………..……………………..……………………………
                                                                                                      28  145,800.00
       29         Less: a. Net operating loss………..……………………..………………………………………………………    29a
                        b. Special deductions………..……………………..………………………………………………………    29b 7,000.00     29c   7,000.00
       30         Taxable income Subtract line 29c from line 28 (See Instructions)…………………………          30  138,800.00
       31         Total Tax………..………..………………..……………………………………………………… 31                                      37,382.00
       32         2008 overpayment credited to 2009………..……………………..………………………………………………………
                                                            32a
            b     2009 Estimated payments…………….………...……………..
                                                  32b   40,000.00
            c     2009 refund applied for -Form 4466…………..………………………………………………… ……
                                                                32c                 d Bal. 32d         40,000
            e     Tax deposited with form 7004………..……………………..………………………………………………………           32e
            f     Credits (1) Form 2439_______(2) Form 4136_________                          32f                 32g    40,000
       33         Estimated tax penalty. Check if Form 2220 is attached………………………………….                              33
       34         Amount Owed……….…..……………………..………………………………………………………                                                34
       35         Overpayment If line 32g is larger than the total of lines 31 and 33, enter amount overpaid………..……………………..………………
                                                                                                                   35  2,618.00
       36       Enter amt of line 35 you want credited to 2010 estimated tax                        Refunded ==> 36
Tab: Form 1120-Balance sheet                                                          File: ebc53cb3-60f9-4cbc-b2be-6030f79adb95.xls                                                     Page 3 of 3


 Form 1120 (20079                                                                     Sample Corporation                                                                                       Page 4
 Schedule L Balance Sheets
                             Assets                                                                (a)                                 (b)                      (c)                      (d)
 1           Cash ……...……..............................................................…….                                                                                                  24,000
 2a          Trade notes and accounts receivable …...……...............                                                                                                48,000
 2b          Less allowance for bad debts .………..........................……                                                                                                                  48,000
 3           Inventories...........……..……….......................................………….
 4           U.S. govemment obligations.………...............................
 5           Tax-exempt securities (see instructions) .…….............                                                                                                                     200,000
 6           Other current assets (attach schedule) (Savings)….......
 7           Loans to stockholders....……...................................………
 8           Mortgage and real estate loans.....……....................……..
 9           Other investments (attach schedule).……....................                                                                                                                    100,000
 10a         Buildings and other depreciable assets.……...................                                                                                           200,000
 10b         Less accumulated depreciation..........……...................                                                                                            16,000                184,000
 11a         Depletable Assets…………………………...……………
 11b         Less accumulated depletion..……................................
 12          Land (net of any amortization) ....……..........................
 13a         Intangible assets (amortizable only)……......................
 13b         Less accumulated amortization.....…….......................
 14          Other assets (attach schedule) .......…….....................
 15          Total Assets………………...……………………………..                                                                                                                                            556,000
             Liabilities and Stockholders' Equity
 16          Accounts payable..............................................                                                                                                                 70,000
 17          Mortgages, notes, bonds payable in less than 1 year….........
 18          Other current liabilities (attach schedule) ..............
 19          Loans from stockholders...........……...........................
 20          Mortgages, notes, bonds payable in 1 year or more……...…..
 21          Other liabilities (attach schedule)………...…….
 22          Capital stock: a Preferred stock.........……...........………….
                                      b Common stock.....……......................                                                                                   400,000                400,000
 23          Additional paid-in capital……..…………...…................................
 24          Adjustments to stockholders equity……..…………...…................................
 25          Retained eamings-Appropriated…………….…………..........
 26          Retained eamings-Unappropriated …….......................………….                                                                     -                                           86,000
 27          Less cost of treasury stock......……...........................………..
 28          Total liabilities and stockholders' equity …………..….                    $                                                           -                               $          556,000
 Note You are not required to complete Schedules M-1 and M-2 if the total assets on Line 15, Column (d) are less than $25,000
 Schedule M-1                                             Reconciliation of Income (Loss) per Books with Income per Return
     1       Net income (loss) per books......………...................... 86,000
                                                                           $                                          7    Income recorded on books this year
     2       Federal income tax.............................................
                                                                           $ 40,000                                        not included on this return (itemize):
     3       Excess of capital losses over capital gains ……............    $ 15,000                                        Tax-exempt interest. $                   14,000.00
     4       Income subject to tax not recorded on books………..........                                                                                                                           14,000
             this year (itemize):………...………….
                                         ………………………………                                                                 8   Deductions on this return not charged
                                                                                                                          against book income this year (itemize):
     5       Expenses recorded on books this year not                                                                  a. Depreciation ...... $                4,000
             deducted on this retum (itemize):                                                                         b. Contributions carryover $
         a   Depreciation .…............. $
         b   Contributions ………….... $                                        13,800
         c   Travel and entertainment... $                                    9,000                                                                                                              4,000
       Bad Debts                                                                       $              22,800          9    Add lines 7 and 8                                                    18,000
     6 Add lines 1 throuqh 5                                                           $             163,800          10 Income (Line 28, page 1) - line 6 less line 9                         145,800
 Schedule M-2                                             Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L)
     1       Balance at beginning of year...................................                                          5 Distributions: a Cash........................................
     2       Net income (loss) per books...................................
                                                                      $                                  86,000                       b Stock .......................................
     3       Other increases (itemize):                                                                                               c Property..................................
                                                                                                                      6 Other decreases (itemize):


                                                                                                                      7    Add lines 5 and 6..........................................
     4        Add lines 1. 2. and 3..........................................
                                                                           $                             86,000       8    Balance at end of year (line 4 less line 7)                      86,000

				
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