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ACC 432 B Tax Return Problem - KJJ Corp.

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Question;Tax Return Problem 14-110:KJJ Corp. was formed on October 10, 1997 by Kimberly Jen (123-45-6789), Jennifer James (234-56-7890) and James Kim (345-067-8901). It is a hardware store and it is located at 175 Clerk Road, Newtown, OH 45105. KJJ?s employer identification number is 10-1010101 and its business code is 444130. KJJ?s telephone number is (513) 525-1234 and its email address is K..p@kjj.com.KJJ Corp. uses the calendar year and the accrual basis. It uses straight-line depreciation for tax and book purposes and FIFO and lower-of-cost-or-market for inventory purposes.Kimberly, Jennifer, and James each receive 200 shares of KJJ Corp.?s common stock on October 10, 1997. No other stock has been issued or is outstanding. Each is a fulltime employee of the firm and each is paid $200,000.KJJ Corp. mad a $105,000 ($35,000 to each owner) cash distribution in 2011.During 2011, KJJ Corp. made estimated federal tax payments of $55,000 each quarter.Financial information for 2011 follows:Income StatementIncomeSales $5,400,000Sales returns and allowances 20,000Net Sales $5,380,000Cost of goods sold 3,120,000Gross profit 2,260,000Interest incomeCorporate bonds $20,000State bonds 60,000 80,000Dividend income 100,000Total income $2,440,000ExpensesSalaries-Officers $600,000Salaries and wages- Other 510,000Life insurance premiums on three owners/officers KJJ Corp. is the beneficiary 20,000Repairs and maintenance 30,000Taxes (state, local, payroll) 249,000Interest expenseLoans to acquire state bonds $25,000Other 47,000 72,000Advertising 36,000Charitable contributions 25,000Depreciation 120,000Employee benefits program 63,000Total expenses 1,725,000Net income before taxes $715,000Federal income taxes (214,200)Net income per books $500,800Balance Sheet12/31/10 12/31/11Assets:Cash $400,000 $550,000Trade and accounts receivables 600,000 623,000Inventories 1,500,000 1,330,000Corporate bonds 250,000 260,000State bonds 800,000 851,000Stock (<20% owned, domestic corporations) 900,000 1,000,000Prepaid federal income taxes 0 5,800Property, plant, and equipment 3,000,000 3,030,000Accumulated depreciation (1,100,000) (1,220,000)Land 50,000 50,000Other assets 6,000 3,000Total assets $6,406,000 $6,482,800Liabilities and Owner?s EquityAccounts payable $301,000 $257,000Other current liabilities 405,000 430,000Mortgages 1,500,000 1,200,000Capital stock 3,000,000 3,000,000Retained earnings 1,200,000 1,595,800Total liabilities and owner?s equity $6,406,000 $6,482,800Prepare KJJ Corp?s Form 1120 and related schedules ? Schedules A, C, E, J, K, L, M-1, and M-2. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). Go to www.irs.gov and download the necessary forms.

 

Paper#40827 | Written in 18-Jul-2015

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