corporate income tax

Project Description:

complete excel worksheets to determine the taxable income of a regular corporation and to partially complete form 1120, u.s. corporation
income tax return.

background information
1. cicada, inc., was formed on may 15, 2007, by jack and jill hill to manufacture plastic bugs to use in elementary school entomology classes. the plastic bugs come in realistic shapes, sizes, and colors; and they are sold in 25 count bags.
2. the corporation’s employer identification number is 13-1234567; the principal
business activity code is 326100; and the business address is 13425 conway road, maryville, missouri 64131.
3. cicada uses the accrual method of accounting and reports on a calendar year
4. inventories are determined under the lower of cost or market method with full
absorption of cost. cicada’s inventory records reflect the following:
5. jack and jill, brother and sister, each own half of the outstanding common stock,
and no other class of stock is authorized. every three years, they rotate positions
of president and vice-president. currently, jill is the president and jack is the vicepresident.
both are full-time employees, and the corporation has no other officers.
each receives an annual salary of $40,000.
6. during 2011, cicada distributed a cash dividend of $5,000.
7. cicada uses the allowance method for bad debts, and $600 of accounts receivable
were written off during the year.
8. because cicada does not need to prepare financial statements using gaap, it uses
tax depreciation methods for book purposes.
9. a child choked on one of cicada’s plastic bugs, and the child’s parents have
threatened legal action for personal damages. cicada recorded a contingent
liability of $10,000 during 2011 and an offsetting debit to lawsuit expense.
beginning inventory, january 1 $ 18,000
ending inventory, december 31 24,000
purchases 135,000
direct labor 67,500
other manufacturing costs 21,000
10. during the current year, cicada made timely, estimated tax payments to the irs
totaling $5,000.
11. fringe benefits expense of $3,600 is for the cost of premiums on the life insurance
policies of jack and jill. cicada owns the policies and is the designated
12. a worksheet showing 2011 book income and expense account balances of cicada,
inc., is provided in the accompanying excel workbook.
• complete the excel worksheet provided to determine taxable income and to facilitate
the preparation of form 1120. to determine any limitations on the charitable
contribution deduction and the dividends received deduction (drd), it will be
beneficial to prepare two worksheets. the first (provided) will be used to determine
modified taxable income for the charitable contribution limitation. after completing
the calculation, copy this worksheet, insert any m-1 for charity, and then use this
second worksheet to determine any limitation for the drd.
• make sure you document your calculations for charitable contributions, drd, and
total tax on the appropriate excel worksheet.
• prepare the 2011 corporate tax return for cicada, inc., by typing the necessary
information on the tax forms provided on the irs website. complete the following
 form 1120, page 1
 form 1120, page 2 – schedule c
 form 1120, page 3 – schedule j, parts i and ii
 form 1120, page 5 – schedule m-1 (note that you will also need to provide a
supporting schedule for line 5 to file with the tax return because there is not
enough space on schedule m-1 to show each book/tax difference.)
 form 1125-a – cost of goods sold
• prepare the journal entry for income tax expense. provide supporting calculations for
the debit to the deferred tax asset account and the credit to the deferred tax liability
account, if applicable. assume cicada will continue to have the same marginal tax
rate in future years as it has for 2011. use a separate worksheet in your excel
workbook to document your work.
Skills Required:
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Price Type: Negotiable

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