Date Incorporated: March 17, 2008

EC has been at the same address and has not changed its name since inception.

EC has only common shares issued (no preferred stock).  There are currently 10,000 shares of EC common stock issued and outstanding.

EC is owned by four shareholders from the same family: Raphael Giordano (father) and his three children Silvia, Andrea, and Marco.  Their personal information is provided below:

Raphael Giordano

160 West 57^th Avenue

New York City, NY 10027

SSN: 356-87-4322

Shares owned 5,500

Silvia Giordano Costa

250 South Main

Hoboken, New Jersey 07030

SSN: 284-58-4583

Shares owned 1,500

Andrea Giordano

65 East 55^th Avenue

New York City, NY 10027

SSN: 423-84-2343

Shares owned 1,500

Marco Giordano

160 West 57^th Avenue

New York City, NY 10027

SSN-487-27-4797

Shares owned 1,500

EC uses the accrual method of accounting and follows GAAP.  EC is not a subsidiary nor is it in an affiliated group with any other entity.  EC is not audited by a CPA firm and has never had a restatement of its income statement.

 EC reported the following information for the year:

·       EC did not pay dividends in excess of its current and accumulated earnings and profits.

·       None of the stock of EC is owned by non U.S. persons

·       EC has never issued publicly offered debt instruments.

·       EC is not required to file a Form UTP

·       EC made several payments in the current year that required the filing of federal Forms 1099.  These Forms 1099 were filed timely by EC.

·       During the year, none of the shareholders of EC changed.

·       EC has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax-deferred transaction.

·       EC did not receive any assets in Section 351 transfers during the year.

·       All of the questions on Schedule B, Form 1120 should be checked “no” for the year.

Additional information:

EC has been expanding rapidly its catering business.  This expansion has required a significant amount of new equipment purchases.  EC sold some of its liquid investments in order to avoid having to take on debt to fund these purchases.  Further, EC invested heavily in its catering business by significantly increasing its advertising budget.  EC and its officers expect that revenue increases from these expenditures will begin next year.

Despite being profitable the past few years, EC does not want to carryback net operating loss (if any) generated in the current year.  EC believes the next few years will be far more profitable and the losses will be of a greater tax benefit in the future.

The dividends received by EC during the year were paid by Apple, Inc.

EC had its sole municipal bond (New York City) redeemed (bought back) in the current year.  EC originally purchased the New York City bonds on February 1, 2010 for $100,000 (no premium or discount paid).  The bond was redeemed by New York City on February 1, 2013 for $100,000.  EC received a Form 1099-B to reflect the transaction.  Box 6b of the 1099-B was checked.

EC purchased 200 shares of Apple, Inc. on October 10, 2010 for $100,000 (including commission).  On July 10, of the current year, EC sold the 200 shares of Apple, Inc. for $350 a share (including commission).  EC received a 1099-B reporting the sale proceeds.  Box 6b was checked on the Form 1099-B.

During the year EC contributed $8,000 to the American Lung Association.

On December 10, EC paid Madison Advertising $27,500 to design a new catering advertisement campaign for next year.  This money represented half of the total $55,000 contract price.  EC expects that the services will be provided and delivered to EC on about June 30, 2014.

EC prepaid an insurance premium of $21,000 in September.  The new policy is effective October 1, 2013 through September 30, 2014

EC’s regular tax depreciation for the year is correctly calculated as $350,000 before considering the current year fixed asset additions of $840,000. EC wants to claim the fastest recovery method(s) possible on these asset additions without electing any §179 expensing.

Total current year asset additions are as follows (all the equipment purchased was new):

EC officer information for the year is as follows (compensation amounts included in total wages on the income statement for all employees):

As reported on the balance sheet (see below), on December 31, 2012 the accrued wages were $44,500 and the accrued bonuses were $45,000.  The wages and bonuses were payable to Raphael, Silvia, Andrea, and Marco.  These accrued wages and bonuses were paid on January 20, of 2013.  Also as reported on the balance sheet, on December 31, 2013, the accrued wages were $51,500.  The wages were owed to Raphael, Silvia, Andrea, and Marco.  The accrued wages were paid on January 22, 2014.

All of the other employees’ wages and bonuses were paid on December 31, 2013.

As of December 31, 2012 and December 31, 2013, respectively, EC had accrued vacation payable on its books of $62,500 and $73,000.  All of the 2012 vacation accrual was paid during the period from April 1 through November 30, 2013.  As of March 15, 2014 EC had paid none of its 2013 accrual.  All of the vacation accrual amounts for both years were owed to employees other than Raphael, Silvia, Andrea, and Marco.  None of the officers had accrued vacation at December 31, 2012 or 2013.

On November 1, a large insurance company paid EC a $100,000 deposit to reserve catering event services on March 18, 2014 at the insurance company’s annual meeting in New York City.  The money is fully refundable up until January 15, 2014.  Thereafter, half of the deposit becomes non-refundable.

EC maintains an inventory of several items.  Inventory is valued at cost.  EC has never has never changed it inventory method.  EC uses specific identification for its inventory.  EC has never written down any subnormal goods.  The rules of Section 263A (UNICAP) do not apply to EC. 

EC did not pay a dividend in the current year.

EC made no estimated tax payments during the current year.

Financial Statements (kept on a GAAP basis):

Express Catering, Inc.

Balance Sheet

Assets:   1/01/2013    12/31/2013

Cash$     62,500$      44,000

Accounts Receivable      145,000       177,000

Less: Allowance for Bad Debts       (32,000)      (41,000)

Inventory        59,000          96,000

Publicly traded securities       100,000    0

Tax-exempt bond       100,000    0

U.S. Treasury Bonds       125,000       125,000

Fixed Assets    2,115,000    2,955,000

Less: Acc. Depreciation   (436,500)     (715,000)

Prepaid Insurance                   0          15,750

Prepaid Rent          38,500         39,500

Prepaid Advertising     0         27,500

Total Assets:  $2,276,500$2,723,750

Liabilities and Shareholders’ Equity:

Accounts Payable        102,000        131,000

Accrued Bonuses          45,000                   0

Accrued Vacation          62,500         73,000

Accrued Wages          44,500          51,500

Event Deposits                    0       100,000

Note Payable-First Bank of NY (Credit Line)         424,000       657,000

Note Payable-EG Capital Equipment Leasing      1,243,000    1,415,000

Capital Stock             1,000             1,000

Additional paid-in Capital           99,000           99,000

Retained Earnings-Unappropriated         255,500                     196,250

Total Liabilities and Shareholders’ Equity:   $2,276,500   $2,723,750

Income Statement for the period ending December 31, 2013

Item Amount

Income:

Gross Sales $  2,925,000

Less: Returns         (8,500)

  Net Sales     2,916,500

Cost of Goods Sold    (1,129,850)

Gross Profit      1,786,650

Dividend Income           2,800

Interest Income -Bank             150

Interest Income-U.S. Treasury           3,000

Municipal Bond Interest Income          1,400

Capital Loss-Apple, Inc.       (30,000)

Total Income:     1,764,000

Expenses:

Employee Salaries        743,500

Repairs and Maintenance          19,000

Bad Debts          44,000

Rent        230,000

Payroll Taxes           60,000

Licensing Fees             4,500

Property Taxes           12,500

Interest Expense        140,000

Depreciation        278,500

Office Supplies            5,400

Employee Training            3,600

Employee Benefits         24,000

Charitable Contribution           8,000

Advertising         70,000

Meals and Entertainment           3,400

Travel               600

Insurance         19,750

Utilities        142,000

Telephone          14,500

Total Expenses: $  1,823,250

Federal income tax expense                   0   

Net Income:    ($59,250)