Unit 9 assignment tax | Accounting homework help

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C:3-66

Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of XX-2015013. The company incorporated on December 31, 2009, and began business on January 2, 2010. Table C:3-4 contains balance sheet information at January 1, 2013, and December 31, 2013. Table C:3-5 presents an income statement for 2013. These schedules are presented on a book basis. Other information follows the tables.

Estimated Tax Payments (Form 2220):

The corporation deposited estimated tax payments as follows:

April 15, 2013	$120,000
June 17, 2013	241,000
September 16, 2013	290,000
December 16, 2013	290,000
Total	$941,000

Some dates are the 16th or 17th because the 15th falls on a weekend or holiday. Taxable income in 2012 was $1.2 million, and the 2012 tax was $408,000. The corporation earned its 2013 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods.

TABLE C:3-4 Melodic Musical Sales, Inc.—Book Balance Sheet Information

	January 1, 2013		December 31, 2013
Account	Debit	Credit	Debit	Credit
Cash	$ 125,614		$ 289,607
Accounts receivable	455,112		529,200
Allowance for doubtful accounts		$ 22,756		$ 26,460
Inventory	2,450,000		3,430,000
Investment in corporate stock	370,000		50,000
Investment in municipal bonds	32,000		32,000
Net current deferred tax asset	12,837		8,996
Cash surrender value of insurance policy	42,000		57,000
Land	300,000		300,000
Buildings	2,000,000		2,000,000
Accumulated depreciation—Buildings		100,000		140,000
Equipment	900,000		2,800,000
Accumulated depreciation—Equipment		150,000		250,000
Trucks	280,000		280,000
Accumulated depreciation—Trucks		84,000		140,000
Accounts payable		340,000		306,000
Notes payable (short-term)		650,000		520,000
Accrued payroll taxes		14,700		18,375
Accrued state income taxes		8,820		14,700
Accrued federal income taxes				127,584
Bonds payable (long-term)		2,500,000		3,000,000
Net noncurrent deferred tax liability		157,287		219,711
Capital stock—Common		980,000		980,000
Retain earnings—unappropriated		1,960,000		4,033,973
Totals	$6,967,563	$6,967,563	$9,776,803	$9,776,803

Inventory and Cost of Goods Sold (Form 1125-A):

The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected on Form 1125-A. No other costs or expenses are allocated to cost of goods sold. Note: the corporation is exempt from the uniform capitalization (UNICAP) rules because average gross income for the previous three years was less than $10 million.

Line 9 (a)	Check (ii)
(b), (c) & (d)	Not applicable
(e) & (f)	No

Compensation of Officers (Form 1125-E):

(a)	(b)	(c)	(d)	(f)
Mary Travis	XXX-XX-XXXX	100%	50%	$287,000
John Willis	XXX-XX-XXXX	100%	25%	175,000
Chris Parker	XXX-XX-XXXX	100%	25%	175,000
Total				$637,000

Bad Debts:

For tax purposes, the corporation uses the direct writeoff method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2013, the corporation charged $39,200 to the allowance account, such amount representing actual writeoffs for 2013.

TABLE C:3-5 Melodic Musical Sales, Inc.—Book Income Statement 2013

Sales		$ 9,800,000
Returns		(245,000)
Net sales		$ 9,555,000
Beginning inventory	$2,450,000
Purchases	5,390,000
Ending inventory	(3,430,000)
Cost of goods sold		(4,410,000)
Gross profit		$ 5,145,000
Expenses:
Amortization	$ –0–
Depreciation	256,000
Repairs	20,384
General ins.	53,900
Net premium-Off. life ins.	44,100
Officer’s compensation	637,000
Other salaries	392,000
Utilities	70,560
Advertising	47,040
Legal and accounting fees	49,000
Charitable contributions	29,400
Payroll taxes	61,250
Interest expense	205,800
Bad debt expense	42,904
Total expenses		(1,909,338)
Gain on sale of equipment		80,000
Interest on municipal bonds		4,900
Net gain on stock sales		48,000
Dividend income		11,760
Net income before income taxes		$ 3,380,322
Federal income tax expense		(1,134,849)
State income tax expense		(73,500)
Net income		$ 2,171,973

Additional Information (Schedule K):

1 b	Accrual
2 a	451140
b	Retail sales
c	Musical instruments
3	No
4 a	No
b	Yes; omit Schedule G
5 a	No
b	No
6-7	No
8	Do not check box
9	Fill in the correct amount
10	3
11	Do not check box
12	Not applicable
13–14	No
15a	No
b	Not applicable
16–18	No

Organizational Expenditures:

The corporation incurred $14,000 of organizational expenditures on January 2, 2009. For book purposes, the corporation expensed the entire expenditure. For tax purposes, the corporation elected under Sec. 248 to deduct $5,000 in 2010 and amortize the remaining $9,000 amount over 180 months, with a full month’s amortization taken for January 2010. The corporation reports this amortization in Part VI of Form 4562 and includes it in “Other Deductions” on Form 1120, Line 26.

Capital Gains and Losses:

The corporation sold 100 shares of PDQ Corp. common stock on October 8, 2013, for $200,000. The corporation acquired the stock on December 15, 2012, for $140,000. The corporation also sold 75 shares of JSB Corp. common stock on June 18, 2013, for $168,000. The corporation acquired this stock on September 18, 2011, for $180,000. The corporation has an $8,000 capital loss carryover from 2011.

Fixed Assets and Depreciation:

For book purposes: The corporation uses straight-line depreciation over the useful lives of assets as follows: Store building, 50 years; Equipment, 15 years (old) and ten years (new); and Trucks, five years. The corporation takes a half-year’s depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements in Tables C:3-4 and C:3-5 reflect these calculations.

For tax purposes: All assets are MACRS property as follows: Store building, 39-year nonresidential real property; equipment, seven-year property; and trucks, five-year property. The corporation acquired the store building for $2 million and placed it in service on January 2, 2010. The corporation acquired two pieces of equipment for $300,000 (Equipment 1) and $600,000 (Equipment 2) and placed them in service on January 2, 2010. The corporation acquired the trucks for $280,000 and placed them in service on July 18, 2011. The trucks are not listed property and are not subject to the limitation on luxury automobiles. The corporation did not make the expensing election under Sec. 179 or take bonus depreciation on any property acquired before 2013. Accumulated tax depreciation through December 31, 2012, on these properties is as follows:

Store building	$ 151,780
Equipment 1	168,810
Equipment 2	337,620
Trucks	145,600

On October 16, 2013, the corporation sold for $320,000 Equipment 1 that originally cost 300,000 on January 2, 2010. The corporation had no Sec. 1231 losses from prior years. In a separate transaction on October 17, 2013, the corporation acquired and placed in service a piece of equipment costing $2.2 million. Assume these two transactions do not qualify as a like-kind exchange under Reg. Sec. 1.1031(k)-1(a). The new equipment is seven-year property. The corporation made the Sec. 179 expensing election with regard to the new equipment but elected out of bonus depreciation. Where applicable, use published IRS depreciation tables to compute 2013 depreciation (reproduced in Appendix C of this text).

Other Information:

• The corporation’s activities do not qualify for the U.S. production activities deduction.
• Ignore the AMT and accumulated earnings tax.
• The corporation received dividends (see Income Statement in Table C:3-5) from taxable, domestic corporations, the stock of which Melodic Musical Sales, Inc. owns less than 20%.
• The corporation paid $98,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings.
• The state income tax in Table C:3-5 is the exact amount of such taxes incurred during the year.
• The corporation is not entitled any credits.
• Ignore the financial statement impact of any underpayment penalties incurred on the tax return.

Required: Prepare the 2013 corporate tax return for Melodic Musical Sales, Inc. along with any necessary supporting schedules.

Optional: Prepare both Schedule M-3 (but omit Schedule B) and Schedule M-1 even though the IRS does not require both Schedule M-1 and Schedule M-3.

Note to Instructor: See solution in the Instructor’s Guide for other optional information to provide to students.

C:3-67

Permtemp Corporation formed in 2012 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:

Sales		$20,000,000
Cost of goods sold		(15,000,000)
Gross profit		$ 5,000,000
Dividend income		50,000
Tax-exempt interest income		15,000
Total income		$ 5,065,000
Expenses:
Depreciation	$ 800,000
Bad debts	400,000
Charitable contributions	100,000
Interest	475,000
Meals and entertainment	45,000
Other	3,855,000
Total expenses		(5,675,000)
Net loss before federal income taxes		$ (610,000)
Cash		$ 500,000
Accounts receivable	$ 2,000,000
Allowance for doubtful accounts	(250,000)	1,750,000
Inventory		4,000,000
Fixed assets	$10,000,000
Accumulated depreciation	(800,000)	9,200,000
Investment in corporate stock		1,000,000
Investment in tax-exempt bonds		50,000
Total assets		$16,500,000
Accounts payable		$2,610,000
Long-term debt		8,500,000
Common stock		6,000,000
Retained earnings		(610,000)
Total liabilities and equity		$16,500,000

Additional information for 2012:

• The investment in corporate stock is comprised of less-than-20%-owned corporations.
• Depreciation for tax purposes is $1.4 million under MACRS.
• Bad debt expense for tax purposes is $150,000 under the direct writeoff method.
• Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary.
• Qualified production activities income is zero.

Required for 2012:

a. Prepare page 1 of the 2012 Form 1120, computing the corporation’s NOL.
b. Determine the corporation’s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2012 Form 1120.
c. Prepare the 2012 Schedule M-3 for Form 1120.
d. Prepare a schedule that reconciles the corporation’s effective tax rate to the statutory 34% tax rate.

Note: For 2012 forms, go to forms and publications, previous years, at the IRS website, www.irs.gov.

For 2013, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:

Sales		$33,000,000
Cost of goods sold		(22,000,000)
Gross profit		$11,000,000
Dividend income		55,000
Tax-exempt interest income		15,000
Total income		$11,070,000
Expenses:
Depreciation	$ 800,000
Bad debts	625,000
Charitable contributions	40,000
Interest	455,000
Meals and entertainment	60,000
Other	4,675,000
Total expenses		(6,655,000)
Net income before federal income taxes		$ 4,415,000
Cash		$ 2,125,000
Accounts receivable	$ 3,300,000
Allowance for doubtful accounts	(450,000)	2,850,000
Inventory		6,000,000
Fixed assets	$10,000,000
Accumulated depreciation	(1,600,000)	8,400,000
Investment in corporate stock		1,000,000
Investment in tax-exempt bonds		50,000
Total assets		$20,425,000
Accounts payable		$ 2,120,000
Long-term debt		8,500,000
Common stock		6,000,000
Retained earnings		3,805,000
		$20,425,000

Additional information for 2013:

• Depreciation for tax purposes is $2.45 million under MACRS.
• Bad debt expense for tax purposes is $425,000 under the direct writeoff method.
• Qualified production activities income is $3 million.

Required for 2013:

a. Prepare page 1 of the 2013 Form 1120, computing the corporation’s taxable income and tax liability.
b. Determine the corporation’s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740. Use the balance sheet information to prepare Schedule L of the 2013 Form 1120.
c. Prepare the 2013 Schedule M-3 for Form 1120.
d. Prepare a schedule that reconciles the corporation’s effective tax rate to the statutory 34% tax rate.

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July 1, 2023

51.Assuming a periodic inventory system is used, identify the statement below that is correct?

A.Freight In is subtracted from Purchases to arrive at delivered cost of purchases.

B.Another name that may be used for the Freight In account is "Transportation In."

C.Freight charges that are listed on the invoice received from a supplier are not part of the total credit to Accounts Payable to record the credit purchase.

D.None of these statements are correct.

52.The amount of the purchases for a period is presented in

A.the Liabilities section of the balance sheet.

B.the Revenue section of the income statement.

C.the Cost of Goods Sold section of the income statement.

D.the Expenses section of the income statement.

53.A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was

A.$14,800.

B.$17,600.

C.$16,200.

D.$15,400.

54.Hugh Snow, the buyer, returned merchandise to Farley Co., the seller. The entry on the books of Hugh Snow to record the return of merchandise assuming a perpetual inventory system is used, would include a:

A.Debit to Accounts Payable

B.Credit to Purchase Returns and Allowances

C.Debit to Account Receivable

D.Debit to Sales Returns and Allowances

55.Assuming a periodic inventory system, the journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid and added to the invoice is:

A.debit Purchases $965; credit Accounts Payable $965

B.debit Accounts Payable $965, debit Freight in $65; credit Purchases $900

C.debit Purchases $900, debit Freight In $65; credit Accounts Payable $965

D.debit Accounts Receivable $965; credit Sales $965

56.Assuming a periodic inventory system is used, the journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid and added to the invoice is:

A.debit Purchases $2,750; credit Accounts Payable $2,750

B.debit Accounts Payable $2,875, credit Freight in $125; credit Purchases $2,750

C.debit Purchases $2,750, debit Freight In $125; credit Accounts Payable $2,875

D.debit Accounts Receivable $2,875; credit Sales $2,875

57.Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $4,856 as of November 1. During November, Tune Tones purchased merchandise from Mandy Lynn totaling $8,495 and made payments on account to Mandy Lynn in the amount of $7,250. The amount Tune Tones owes Mandy Lynn on November 30 is:

A.$6,101

B.$3,611

C.$10,889

D.$7,250

58.Nadal, Inc. owes Wozniaki Company $10,560 as of April 1. During April, Nadal, Inc. purchased $12,800 of merchandise from Wozniaki Company and made payments on account to Wozniaki Company totaling $9,200. The amount Nadal, Inc. owes Wozniaki Company on April 30 is:

A.$9,200 debit

B.$6,960 credit

C.$14,160 credit

D.$12,800 debit

59.If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a

A.decrease to Fees Income.

B.increase of capital.

C.increase to accounts receivable.

D.decrease to accounts payable.

60.Which of the following accounts has a normal debit balance?

A.Purchases

B.Purchase Returns

C.Accounts Payable

D.Sales

July 1, 2023

Directions:

You are working the night shift in the Intensive Care Unit. Your patient starts to deteriorate, and the primary provider is not calling you back. The charge nurse offers to contact her. A few minutes later, the charge nurse shows you a text from her personal phone with orders for the client, supposedly from the provider.

Main post:

What would you do in that situation and why?
Give an example of an ethical dilemma involving confidentiality and the use of technology.
How would you respond to the situation in your example?

Peer replies:

For your replies, provide classmates with an alternative intervention for the ethical dilemma
Include well-researched the rationale for using the intervention.

Please make your initial post by midweek, and respond to at least two other student's post by the end of the week. All posts require references AND in-text citations in full APA format. Information must be paraphrased and not quoted. Please check the Course Calendar for specific due dates. NOTE: Finalized postings must be submitted by deadlines. Any edits after deadline will be counted as late submissions and deducted accordingly. If you need to make any corrections for clarity's sake only, you can write an addendum as a reply to yourself. The initial post will still be the one receiving full grade.

Make sure all posts are thorough, well-researched, and meet minimum requirements and word counts (see rubric).

July 1, 2023

Directions:

Main post:

What would you do in that situation and why?
Give an example of an ethical dilemma involving confidentiality and the use of technology.
How would you respond to the situation in your example?

Peer replies:

For your replies, provide classmates with an alternative intervention for the ethical dilemma
Include well-researched the rationale for using the intervention.

Make sure all posts are thorough, well-researched, and meet minimum requirements and word counts (see rubric).

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Unit 9 assignment tax | Accounting homework help

TABLE C:3-4 Melodic Musical Sales, Inc.—Book Balance Sheet Information

TABLE C:3-5 Melodic Musical Sales, Inc.—Book Income Statement 2013

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