Question

Use the 2018 tax forms, available at irs.gov

Louis Talbott (124-00-9000) and Susie Sunshine (123-00-8000) are 60% and 40% owners of Special Treats Inc. (11-0011221) a candy company located at 145 Avenue G, Quarter Box, TX, 77823. The company’s S-corporation election was made on January 15, 2017. The following comes from the income statement for the current year:

Interest Income                       $100,000

Gross sales receipts                      1,100,000

Beginning inventory                          9,600

Direct Labor                              103,100

Direct materials purchased                      178,200

Other direct costs                          49,400

Ending inventory                          3,500

Salaries and wages                          42,100

Officers’ salaries                          50,000

Repairs                              16,100

Depreciation (same amount for book and tax)          15,300

Interest Expense                          5,200

Rent Expense                              40,000

Taxes                                  15,100

Charitable contributions (cash)                  20,000

Advertising expense                          30,000

Other deductions                          50,000

Book income                           $579,400

Comparative Balance Sheet

_______________________________________________________________________

                       Jan 1, 2018       Dec. 31, 2018

_______________________________________________________________________

Cash                       47,800           ?

Accounts Receivable               93,100           123,100

Inventories                      9,600           3,500

Prepaid expenses                  8,300           17,600

Building & Equipment           138,200           185,300

   Acc. Depreciation          (84,200)       ?

Land                          2,000           2,000

Total Assets               $214,800           $719,200

Additional information:

   Distributions to shareholders       $100,000

Using the information provided, prepare a complete form 1120S and the Schedule K-1s for the shareholders. If any information appears to be missing, make realistic assumptions and list them.

              

Answer 1

Form 1120S of Special Treats Inc for the year 2018

Effective Date : 22/12/2018 Name - Special Treats Inc Employer Identification Number _______________

Business Activity Code : 11-0011221 Address : 145 Avenue G, Quarter Box, TX, 77823 Date Incorporated : January 15,2017

Number of shareholders who were shareholders during any part of the tax year : 2

1 a Gross receipts or sales	1a $1,100,000
b Return and Allowance	1 Nil
c Balance, subtract from line 1b from line 1a		1c $1,100,000
2.Cost of Goods Sold		$336,800
3. Gross Profit subtract line 2 from line 1c		$763,200
4. Net gain (loss) from Form 4797, line17 (attach form 4797)		Nil
5. Other income (loss)		$100,000
6. Total income (loss), add line 3 through 5		$863,200
7. Compensation of officers		$50,000
8. Salaries and wages (less employment credit)		$42,100
9. Repair & Maintenance		$16,100
10. Bad Debts		Nil
11. Rents		$40,000
12. Taxes and Licenses		$15,100
13. Interest		$5,200
14.Depreciation not claimed on Form 1125-A or elsewhere on return		$15,300
15. Depletion (Do not deduct oil and gas depletion)		Nil
16. Advertising		$30,000
17. Pension, profit sharing, etc. plans		Nil
18. Employee benefit programs		Nil
19. Other deductions		$70,000
20. Total deductions (add line 7 through 19)		$283,800
21. Ordinary business income (loss) , subtract line 20 from line 6		$579,400
22 a Excess net passive income or LIFO recapture tax	22a Nil
bExpert Q&A Tax from Schedule D	22b Nil
c Add lines 22a and 22b		22c Nil
23 a 2018 estimated tax payments and 2017 overpayment credited to 2018	23a $15,100
b Tax deposited with form 7004	23b Nil
c Credit for federal tax paid on fuels	23c Nil
d Refundable credit from Form 8827	23d Nil
e Add line 23a through 23d		23e $15,100
24 Estimated tax penalty		24 Nil
25 Amount owed, if line 23e is smaller than the total of lines 22c and 24 , enter amount owed		25 Nil
26 Overpayment, if line 23e is larger than the total of lines 22c and 24, enter amount overpaid		26$15,100
27 Enter amount from line 26 : Credited to 2019 estimated tax		27 $15,100

Sign Here Signature of Officer Date Title