Preparation of tax returns and related schedules can be very helpful in terms of integrating and...

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Preparation of tax returns and related schedules can be very helpful in terms of integrating and applying tax concepts. To that end, please prepare the appropriate tax forms and schedules for the problem below. You may use the software provided with your textbook or prepare the forms by hand. Instructions for all forms and schedules may be obtained from the IRS website. A hard copy of your solution with schedules and forms in proper attachment order (stapled or clipped) is to be submitted in class. Check figure: Taxable Income (line 30) = $1,470,022. ■ ■ ■ ■ ■ ■ ■ On November 17, 2001, Autumn Leigh and Aaron Johns formed Sportico, Inc. to sell sporting goods. Pertinent information regarding Sportico, Inc. is summarized as follows: Sportico Inc.'s business address is 2120 Rebecca Lane, Great Falls, Montana 59401; its telephone number is (575) 541-1122; and its email address is Sportico@Sportico.com. The employer identification number is 11-1111111, and the principal business activity code is 451110. Autumn is president of the company, and Aaron is vice president. Each own 25% of the shares of the company. The remaining 50% of the stock is owned by 30 other shareholders, for a total of 32 shareholders. None of the other shareholders own more than 20% of the stock. Aaron and Autumn are full-time employees of Sportico, Inc. Autumn's Social Security number is 123-45-6789, and Aaron's Social Security number is 987-65-4321. Sportico, Inc. is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Sportico, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes. Sportico, Inc.'s income statement for 2019 is shown on page 2. Sportico, Inc.'s balance sheet is as follows: Cash Accounts receivable Inventories Stock investment State of Montana bonds Certificates of Deposit Buildings and other depreciable assets Accumulated depreciation Land Other assets Total assets Accounts payable Other current liabilities Mortgages Capital stock Retained Earnings Total liabilities and equity January 1, 2019 1,200,000 2,062,500 2,750,000 1,125,000 375,000 400,000 4,805,000 (727,000) 812,500 140,000 12,943,000 2,284,000 175,000 4,625,000 2,500,000 3,359,000 12,943,000 December 31, 2019 1,753,467 2,247,000 3,030,000 1,075,000 375,000 400,000 5,305,000 (1,602,000) 812,500 178,500 13,574,467 1,975,000 155,000 4,575,000 2,500,000 4,369,467 13,574,467 The following additional information is found in the tax working papers: Dividends were from Heath Corporation, a less-than-20%-owned domestic corporation.¹ The capital gain resulted from the sale of Bulldog Enterprises stock. Sportico, Inc. purchased the Bulldog Enterprises stock on 3/2/2011 for $24,000. The stock was sold on 2/14. The capital loss resulted from the sale of Bummer, Inc. stock. The stock was purchased March 5, 2009 for $50,000. The stock was sold on 6/3. ■ ■ ■ Purchases (for COGS) were $3,380,000. Assume non cost of labor for COGS. ■ Retained earnings are unappropriated. All contributions were paid in cash during the current year to Great Falls University. State income taxes for 2019 were $91,545. Payroll taxes were $61,583. Actual bad debts for the year were $31,500. ■ ■ ■ ■ ■ ■ ■ The actual warranty outlay for the year was $7,250. At the end of the year, Sportico hosts a holiday party for their employees. $800 is included in Other Expenses to cover the meals at the party. For tax purposes, depreciation amounted to $950,000. Sportico, Inc. declared a $200,000 cash dividend during the current year. During 2019, Sportico, Inc. made estimated tax payments of $80,000 each quarter to the IRS. Mr. Johns and Ms. Leigh receive officer's compensation of $100,000 each. Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends Interest income State of Montana bonds Certificates of deposit Gain on sales of stock Loss on sale of stock Other income Total income Expenses Officer compensation Other salaries and wages Taxes (state, local, and payroll) Interest expense Funds borrowed for working capital Warranty expense Income Statement Depreciation* Charitable contributions Premiums on key-man life insurance policies Bad debt expense Other expenses Total expenses Net income before taxes Federal income tax Net income per books 9,375 10,000 200,000 605,000 153,128 26,000 9,300 875,000 88,000 10,000 29,800 435,000 6,900,000 (70,000) 6,830,000 (3,100,000) 3,730,000 18,000 19,375 18,500 (27,000) 216,500 3,975,375 (2,431,228) 1,544,147 (333,680) 1.210.467 A little guidance for the M-3: For Part I: Enter "No" for la and lb, "Yes" for 1c, "No" for 2b, 2c, and 3a. There are no foreign entities for this problem, so you will have numbers on 4a, 11 and 12a only. Part II is for income accounts, Part III is for expense accounts. You input the income statement account balance in column (a) and then the book-tax difference (what you would put on the M-1) in column (b) or (c) depending on whether it is permanent or temporary. Column (d) is the sum of columns (a), (b), and (c) so your book-tax difference should have a sign to make that work mathematically. All amounts in column (a) are entered with a positive sign including expense accounts with the exception of a book-tax difference for capital losses in excess of capital gains. Do not put numbers in column (a) unless there is a book-tax difference. The income statement accounts that do not have book-tax differences are summed and entered in Part II on line 28: Other items with no differences. Preparation of tax returns and related schedules can be very helpful in terms of integrating and applying tax concepts. To that end, please prepare the appropriate tax forms and schedules for the problem below. You may use the software provided with your textbook or prepare the forms by hand. Instructions for all forms and schedules may be obtained from the IRS website. A hard copy of your solution with schedules and forms in proper attachment order (stapled or clipped) is to be submitted in class. Check figure: Taxable Income (line 30) = $1,470,022. ■ ■ ■ ■ ■ ■ ■ On November 17, 2001, Autumn Leigh and Aaron Johns formed Sportico, Inc. to sell sporting goods. Pertinent information regarding Sportico, Inc. is summarized as follows: Sportico Inc.'s business address is 2120 Rebecca Lane, Great Falls, Montana 59401; its telephone number is (575) 541-1122; and its email address is Sportico@Sportico.com. The employer identification number is 11-1111111, and the principal business activity code is 451110. Autumn is president of the company, and Aaron is vice president. Each own 25% of the shares of the company. The remaining 50% of the stock is owned by 30 other shareholders, for a total of 32 shareholders. None of the other shareholders own more than 20% of the stock. Aaron and Autumn are full-time employees of Sportico, Inc. Autumn's Social Security number is 123-45-6789, and Aaron's Social Security number is 987-65-4321. Sportico, Inc. is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Sportico, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes. Sportico, Inc.'s income statement for 2019 is shown on page 2. Sportico, Inc.'s balance sheet is as follows: Cash Accounts receivable Inventories Stock investment State of Montana bonds Certificates of Deposit Buildings and other depreciable assets Accumulated depreciation Land Other assets Total assets Accounts payable Other current liabilities Mortgages Capital stock Retained Earnings Total liabilities and equity January 1, 2019 1,200,000 2,062,500 2,750,000 1,125,000 375,000 400,000 4,805,000 (727,000) 812,500 140,000 12,943,000 2,284,000 175,000 4,625,000 2,500,000 3,359,000 12,943,000 December 31, 2019 1,753,467 2,247,000 3,030,000 1,075,000 375,000 400,000 5,305,000 (1,602,000) 812,500 178,500 13,574,467 1,975,000 155,000 4,575,000 2,500,000 4,369,467 13,574,467 The following additional information is found in the tax working papers: Dividends were from Heath Corporation, a less-than-20%-owned domestic corporation.¹ The capital gain resulted from the sale of Bulldog Enterprises stock. Sportico, Inc. purchased the Bulldog Enterprises stock on 3/2/2011 for $24,000. The stock was sold on 2/14. The capital loss resulted from the sale of Bummer, Inc. stock. The stock was purchased March 5, 2009 for $50,000. The stock was sold on 6/3. ■ ■ ■ Purchases (for COGS) were $3,380,000. Assume non cost of labor for COGS. ■ Retained earnings are unappropriated. All contributions were paid in cash during the current year to Great Falls University. State income taxes for 2019 were $91,545. Payroll taxes were $61,583. Actual bad debts for the year were $31,500. ■ ■ ■ ■ ■ ■ ■ The actual warranty outlay for the year was $7,250. At the end of the year, Sportico hosts a holiday party for their employees. $800 is included in Other Expenses to cover the meals at the party. For tax purposes, depreciation amounted to $950,000. Sportico, Inc. declared a $200,000 cash dividend during the current year. During 2019, Sportico, Inc. made estimated tax payments of $80,000 each quarter to the IRS. Mr. Johns and Ms. Leigh receive officer's compensation of $100,000 each. Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends Interest income State of Montana bonds Certificates of deposit Gain on sales of stock Loss on sale of stock Other income Total income Expenses Officer compensation Other salaries and wages Taxes (state, local, and payroll) Interest expense Funds borrowed for working capital Warranty expense Income Statement Depreciation* Charitable contributions Premiums on key-man life insurance policies Bad debt expense Other expenses Total expenses Net income before taxes Federal income tax Net income per books 9,375 10,000 200,000 605,000 153,128 26,000 9,300 875,000 88,000 10,000 29,800 435,000 6,900,000 (70,000) 6,830,000 (3,100,000) 3,730,000 18,000 19,375 18,500 (27,000) 216,500 3,975,375 (2,431,228) 1,544,147 (333,680) 1.210.467 A little guidance for the M-3: For Part I: Enter "No" for la and lb, "Yes" for 1c, "No" for 2b, 2c, and 3a. There are no foreign entities for this problem, so you will have numbers on 4a, 11 and 12a only. Part II is for income accounts, Part III is for expense accounts. You input the income statement account balance in column (a) and then the book-tax difference (what you would put on the M-1) in column (b) or (c) depending on whether it is permanent or temporary. Column (d) is the sum of columns (a), (b), and (c) so your book-tax difference should have a sign to make that work mathematically. All amounts in column (a) are entered with a positive sign including expense accounts with the exception of a book-tax difference for capital losses in excess of capital gains. Do not put numbers in column (a) unless there is a book-tax difference. The income statement accounts that do not have book-tax differences are summed and entered in Part II on line 28: Other items with no differences.

Answer rating: 100% (QA)

Additional information a Sport ico Inc declared and paid dividends of 75 000 during 2019 b Sport ico Inc rep urch ased 100 000 of its own common stock during 2019 c Sport ico Inc paid interest expense ... View the full answer