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S CORPORATION TAX RETURN PROBLEM;Required;? Using the information provided below, complete Salt Source Inc.?s (SSI) 2013;Form 1120S. Also complete Kim Bentley?s Schedule K-1.;? Form 4562 for depreciation is not required. Include the amount of tax;depreciation given in the problem on the appropriate line on the first page of;Form 1120S.;? If any information is missing, use reasonable assumptions to fill in;the gaps.;? The forms, schedules, and instructions can be found at the IRS Web site;( The instructions can be helpful in completing the forms.;Facts;Salt Source Inc. (SSI) was formed as a corporation on January 5, 2007, by its two;owners Kim Bentley and James Owens. SSI immediately elected to be taxed as an;S corporation for federal income tax purposes. SSI sells salt to retailers throughout;the Rocky Mountain region. Kim owns 70 percent of the SSI common stock (the;only class of stock outstanding) and James owns 30 percent.;? SSI is located at 4200 West 400 North, Salt Lake City, UT 84116.;? SSI?s Employer Identification Number is XXXXX;? SSI?s business activity is wholesale sales. Its business activity code is 424990.;? Both shareholders work as employees of the corporation.;? Kim is the president of SSI (Social Security numberNNN-NN-NNNN. Kim?s;address is 1842 East 8400 South, Sandy, UT 84094.;? James is the vice president of SSI (Social Security numberNNN-NN-NNNN.;James?s address is 2002 East 8145 South, Sandy, UT 84094.;? SSI uses the accrual method of accounting and has a calendar year-end.;12/31/13 12/31/12;Liabilities and Capital;Accounts payable $ 49,000 $ 45,500;Notes payable 50,000 0;Mortgage payable 63,000 67,500;Capital: XXXXX XXXXX 94,553 82,040;Steve Stillwell 217,542 176,679;TOTALS $474,095 $371,719;C-18;The following is SSI?s 2013 income statement;SSI;Income Statement;For year ending December 31, 2013;Revenue from sales $980,000;Sales returns and allowances (10,000);Cost of goods sold (110,000);Gross profit from operations;$860,000;Other income;Dividend income $ 15,000;Interest income 5,000;Gross income $880,000;Expenses;Compensation ($600,000);Depreciation (10,000);Bad debt expense (14,000);Meals and entertainment (2,000);Maintenance (8,000);Business interest (1,000);Property taxes (7,000);Charitable contributions (10,000);Other taxes (30,000);Rent (28,000);Advertising (14,000);Professional services (11,000);Employee benefits (12,000);Supplies (3,000);Other expenses (21,000);Total expenses (771,000);Net income $ 109,000;Notes;1. SSI?s purchases during 2013 were $115,000. It values its inventory based on cost;using the FIFO inventory cost flow method. Assume the rules of ?263A do not;apply to SSI.;2. Of the $5,000 interest income, $2,000 was from a West Jordan city bond used to;fund public activities (issued in 2007) and $3,000 was from a money market;account.;3. SSI?s dividend income comes from publicly traded stocks that SSI has owned;for two years.;4. SSI?s compensation is as follows;? Kim $120,000;? James $80,000;? Other $400,000.;5. SSI wrote off $6,000 in accounts receivable as uncollectible during the year.;6. SSI?s regular tax depreciation was $17,000. AMT depreciation was $13,000;Appendix C;C-19;7. SSI distributed $60,000 to its shareholders.;8. SSI is not required to compute the amount in its accumulated adjustments;account.;The following are SSI?s book balance sheets as of January 1, 2010, and December 31;2010.;2010;January 1 December 31;Assets;Cash $ 90,000 $143,000;Accounts receivable 300,000 310,000;Allowance for doubtful accounts (60,000) (68,000);Inventory 45,000 50,000;State and local bonds 38,000 38,000;Investments in stock 82,000 82,000;Fixed assets 100,000 100,000;Accumulated depreciation (20,000) (30,000);Other assets 20,000 21,000;Total assets $595,000 $646,000;Liabilities and Shareholders? Equity;Accounts payable 60,000 55,000;Other current liabilities 5,000 8,000;Other liabilities 10,000 14,000;Capital stock 200,000 200,000;Retained earnings 320,000 369,000;Total liabilities and shareholders? equity $595,000 $646,000


Paper#20066 | Written in 18-Jul-2015

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