1. Prepare a Form 1120 Corporate Tax Return for 2020. The following forms must be completed: * Form 1120: U. S. Corporation Income Tax Return (pages 1 – 6)
* Schedule D (for Form 1120): Capital Gains and Losses
* Form 1125-A: Cost of Goods Sold
* Form 1125-E: Compensation of Officers
* Form 8949: Sale and Disposition of Capital Assets
* Form 4562: Depreciation
* Form 4797: Sales of Business Property
In addition, you must attach supporting schedules for line items in the tax return whenever required, e. g., Line 26 of Form 1120. DO NOT complete Form 2220: Underpayment of Estimated Tax by Corporations.
2. When completing the return, round amounts to the nearest dollar (and leave the cents columns blank). Do not place zeros on lines for which there is no amount (unless the instructions tell you to do so); merely leave the line blank. You must prepare the return by hand. You must use a pencil when preparing your return; no ink, no typing, no computer-generated print.
FACTS:
JC Musical Sales, Inc., is located at 514 Crimson Lane, Bakersville, North Carolina 28705. 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 75-8799797. The company incorporated on December 31, 2016 and began business on January 2, 2017. Balance sheet information at January 1, 2020 and December 31, 2020, and an income statement for 2020 (all on a book basis) are included in a separate file on Blackboard.
Book Balance Sheet Information
January 1, 2020 Decemer 31, 2020
AccountDebitCreditDebitCredit
Cash516,774 815,494
Accounts receivable400,000 500,000
Allowance for doubtful accounts 20,000 25,000
Inventory2,500,000 3,500,000
Investment in corporate stock260,000 50,000
Investment in municipal bonds30,000 30,000
Cash surrender value of life insurance60,000 80,000
Land200,000 200,000
Buildings2,000,000 2,000,000
Accum. Depreciation - buildings 100,000 140,000
Equipment750,000 1,100,000
Accum. Depreciation - equipment 187,500 205,000
Trucks100,000 100,000
Accum. Depreciation - trucks 30,000 50,000
Accounts payable 300,000 270,000
Notes payable (short-term) 800,000 640,000
Accrued payroll taxes 14,880 18,600
Accrued state income taxes 4,500 7,500
Accrued federal income taxes 2,500 77,361
Bonds payable (long-term) 1,800,000 600,000
Deferred tax liability 57,394 167,593
Capital stock - common 1,500,000 1,500,000
Retained earnings - unappropriated 2,000,000 4,674,440
Totals6,816,7746,816,7748,375,4948, 375,494