Micro, Inc. is a computer equipment manufacturer. Micro is a calendar-year C corporation that uses the accrual method of tax accounting. Bill has prepared a corporate tax return for Micro, Inc. for your review. Bill has very little experience and has made some errors that you have discovered. You have the following information available for the return:

Gross Sales $ 1,000,000

COGS 450,000

Gross Profit $ 550,000

Dividend Income 20,000

Interest Income 10,000

$580,000

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Other Expenses/Loss:

Rent 72,000

Subcontracting 18,000

Other Overhead 350,000

Charitable Cont. 15,000

Net LT Capital Loss 12,000

NOL C/O last year 50,000

$517,000

Micro paid no interest expense. The dividends are paid from several domestic US corporations of which Micro owns less than 1% of each. Bills tax return is summarized as follows:

Gross Profit $ 550,000

Dividend income 20,000

Interest income 10,000

Rent ( 72,000)

Subcontracting ( 18,000)

Other Overhead (350,000)

Capital Loss (12,000)

Charitable Cont. Deduct. (15,000)

Taxable Income $ 113,000

Tax 39,550

Required: Identify Bills errors and omissions. Provide a brief explanation for each that you find. Recalculate Micros tax return using your computations to minimize its taxable income.

Answer rating: 100% (QA)

Bill erred in preparing Micro Incs corporate tax return Below are the corrections needed and explanations for each error identified Error 1 Net Operat... View the full answer