On November 1, 2008, Joe Morgan 1,000 shares and Sam Arnold 1,000 shares formed FENWAY Sports, Inc., to manufacture and sell Sporting Goods. In the current year 2020, Ryan Fountain contributed $1,500,000 worth of manufacturing equipment with a tax basis of $500,000 for another 1,000 shares in the Company. Pertinent information regarding FENWAY Sports, Inc. is summarized as follows:

FENWAY Sports, Inc.’s business address is 1010 Northwest Parkway, Irvine CA 92602; its telephone number is (714) 555-2211.

The employer identification number is 11-1111112, and the principal business activity code is 339920.

Joe and Sam each owned 50% (33% after Ryan’s contribution) of the common stock; Joe is president and Sam is vice president of the company. Ryan is now a 33% investor. He doesn’t hold any titles for the corporation.

Both Joe and Sam are full-time employees of FENWAY Sports, Inc. Joe’s Social Security number is 123-45-6788, and Sam’s Social Security number is 123-45-6787.

FENWAY Sports, Inc. is an accrual method (can’t use the cash method because of gross receipts level), calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. FENWAY Sports, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.

During 2020, the corporation distributed cash of $600,000 equally to all shareholders

FENWAY Sports, Inc.’s GAAP audited financial statements for 2020 are shown in separate file.

Depreciation for tax purposes is $1,050,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). If you solve this problem using Intuit Pro Connect, enter the amount of depreciation on line 20 of Form 1120.

During 2020, FENWAY Sports, Inc. made estimated tax payments of $450,000 each quarter to the IRS. Prepare a Form 1120 for FENWAY Sports, Inc. for tax year 2020.

Prepare the form 1120 and related schedules and statements as you deemed necessary under the tax law after the Cares Act. DO NOT PREPARE THE STATE TAX RETURNS. You will use the 2020 forms. In addition, you need to prepare an explanation write up on how you treated the items is the facts above. The explanation is meant to determine if you understand the 1120 assignment. Please explain how you determined what is taxable, not taxable, deductible, or not deductible. Use the appropriate authorities to document your conclusions. Also, provide detail computations of your permanent and temporary differences and any other facts in the case. Finally, please provide a computation of the Company’s 2020 Earnings and Profits and determine the tax consequences of any applicable transactions that effect the shareholders. If the facts aren't in the case, please make your own assumptions and document them

Please help, especially to calculate current earning and profit 2020

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Financial Statements 12/31/2020 Gross Sales Sales and Returns Net Sales Cost of Good Sold Gross Profit Dividends In 50% US Corp Interest Income City of Irvine Muni Bonds CDs Total Income Salaries Joe Salaries Sam Bad Debts. Other Salaries Taxes-State and Local Repairs and Maintenance Interest Expense: Loan to purchase Tustin Bonds Line of Credit Advertising Rental Expense Depreciation Book Depreciation* Cash Charitable Contributions Premiums on Life Insurance for Owners Total Expenses Net Income Before Taxes Federal Taxes Net Income Per Books *Depreciation for Taxes is $1,050,000 35,000,000 (1,000,000) 34,000,000 (15,000,000) 19,000,000 3,000,000 75,000 25,000 22,100,000 1,500,000 1,500,000 250,000 230,000 650,000 140,000 50,000 9,500,000 200,000 150,000 600,000 2,500,000 150,000 17,420,000 4,680,000 694,050 3,985,950 Cash Accounts Receivable Bad Debt Allowance Inventories Stock Investment Mini Bonds CDs Equipment: Ryans Contribution Other Equipment Accumulated Depreciation Other Assets (including Deferred Taxes) Total Assets Accounts Payable ** Line Of Credit (10%) Capital Stock Retained Earnings Total Liabilities and Equity ** Includes borrowing for Tax Exempt Bonds 12/31/2019 20,950,000 2,500,000 (250,000) 45,000,000 30,000,000 1,500,000 800,000 5,000,000 (2,500,000) 5,000,000 108,000,000 5,000,000 95,000,000 3,000,000 5,000,000 108,000,000 12/31/2020 13,185,950 3,000,000 (500,000) 55,000,000 30,000,000 1,500,000 800,000 1,500,000 6,000,000 (3,100,000) 8,000,000 115,385,950 7,500,000 95,000,000 4,500,000 8,385,950 115,385,950 Financial Statements 12/31/2020 Gross Sales Sales and Returns Net Sales Cost of Good Sold Gross Profit Dividends In 50% US Corp Interest Income City of Irvine Muni Bonds CDs Total Income Salaries Joe Salaries Sam Bad Debts. Other Salaries Taxes-State and Local Repairs and Maintenance Interest Expense: Loan to purchase Tustin Bonds Line of Credit Advertising Rental Expense Depreciation Book Depreciation* Cash Charitable Contributions Premiums on Life Insurance for Owners Total Expenses Net Income Before Taxes Federal Taxes Net Income Per Books *Depreciation for Taxes is $1,050,000 35,000,000 (1,000,000) 34,000,000 (15,000,000) 19,000,000 3,000,000 75,000 25,000 22,100,000 1,500,000 1,500,000 250,000 230,000 650,000 140,000 50,000 9,500,000 200,000 150,000 600,000 2,500,000 150,000 17,420,000 4,680,000 694,050 3,985,950 Cash Accounts Receivable Bad Debt Allowance Inventories Stock Investment Mini Bonds CDs Equipment: Ryans Contribution Other Equipment Accumulated Depreciation Other Assets (including Deferred Taxes) Total Assets Accounts Payable ** Line Of Credit (10%) Capital Stock Retained Earnings Total Liabilities and Equity ** Includes borrowing for Tax Exempt Bonds 12/31/2019 20,950,000 2,500,000 (250,000) 45,000,000 30,000,000 1,500,000 800,000 5,000,000 (2,500,000) 5,000,000 108,000,000 5,000,000 95,000,000 3,000,000 5,000,000 108,000,000 12/31/2020 13,185,950 3,000,000 (500,000) 55,000,000 30,000,000 1,500,000 800,000 1,500,000 6,000,000 (3,100,000) 8,000,000 115,385,950 7,500,000 95,000,000 4,500,000 8,385,950 115,385,950

Answer rating: 100% (QA)

In order to calculate FENWAY Sports Incs current Earnings and Profits EP for the year 2020 we will need to make adjustments to the net income reported ... View the full answer