Facts in 2018: ABC Inc

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Facts in 2018:

• ABC Inc. 777 Oak Dr Houston TX 77002.
• EIN-74-1234567.
• Date Incorporated 1/1/2000.
• Total Assets $5,390,000 as of 12/31/2018.
• Business Activity Code is 448140 and business activity and product is a retail trade of family clothing (Hint – Schedule K.)

• ABC Inc.’s Net Income per books is $440,000 (Hint – Schedule M-1)
• Gross Receipts $1,200,000
• Cost of Goods Sold $600,000 (assume no beginning and ending inventory and purchases were $600,000) (Hint – Form 1125-A)
• ABC Inc. received $20,000 in interest income from US Treasury Notes during 2018.
• ABC Inc. uses the lower of cost or market method for valuing inventory and also uses the FIFO method for determining the cost of goods sold. Cash method of accounting is used for all other expenses other than inventory.

 

• Compensation paid to sole shareholder, John Doe. SSN-222-22-2222 was $200,000.
• Salaries and wages paid to employees were $60,000.
• Office Rent paid for corporate headquarters was $20,000.
• ABC Inc. contributed $60,000 to the Salvation Army, a non-profit charitable organization. (Hint – See Charitable Contributions in Chapter 16. The contribution may be limited. If the deduction is limited, an entry is required on Schedule M-1.)
• Television advertising to promote the company products was $40,000.

 

• ABC Inc. elected to carry over $7,500 of overpaid taxes from 2017 to 2018 (Hint - Schedule J Part III).
• ABCClothing Inc. paid $22,000 for each of the 4 quarters for estimated tax payments in 2018 (Hint - Schedule J Part III).

 

• ABC Inc. owns 10% of Better Inc., EIN: 74-3333333, a domestic corporation, and received dividends in the amount of $100,000 in 2018. (Hint – The dividends will be reported on Form 1120 and the Dividend Deduction on Schedule C)
• ABC Inc. owns 40% of Best Inc., EIN: 74-4444444, a domestic corporation, and received dividends in the amount of $100,000 in 2018. (Hint – The dividends will be reported on Form 1120 and the Dividend Deduction on Schedule C)

 

 

 

• ABC Inc. is a calendar year taxpayer and not affiliated with any other entity.
• No dividends were declared or paid by ABC Clothing Inc.
• No Forms 1099-Misc were required to be issued.
• ABC Inc. has always shown a profit since inception.

       . Balance Sheet Per Books information follows:

Assets:	1/1/2018	12/31/2018
Cash	$   250,000	$   590,000
Treasury Notes	$1.200,000	$1,200,000
Prepaid Income Tax	$   0	$   100,000
Better Inc. Investment	$   200,000	$   200,000
Best Inc. Investment	$   800,000	$   800,000
Land	$2,500,000	$2,500,000
Total assets	$4,950,000	$5,390,000
Liabilities and Shareholders’ Equity:
Capital Stock ($100 par, 1,000 shares issued & outstanding)	$   100,000	$   100,000
Retained Earnings	$4,850,000	$5,290,000
Total liabilities and shareholders’ equity	$4,950,000	$5,390,000

ABC Inc has engaged you to prepare the 2018 Form 1120.   You are encouraged to use Tax ACT to prepare the Form 1120 for ABC Inc

Form 1120

Schedule C

Schedule J

Schedule K

Schedule L

Schedule M-1

Schedule M-2

Form 1125-A