Regulation Simulation: AICPA Released (adapted)

Information:

The income statement for the first year of operations of InterTax, Inc. is shown below.

Question 1:

Based on the data provided in the previous page, enter the appropriate values in the shaded fields of form 1120 below. Complete lines 1a-30 on form 1120, U.S. Corporation Income Tax Return for InterTaxs first year of operations. Use the worksheet on the next tab (line 26 Worksheet) to calculate the value for line 26.

Question 2:

Use the spreadsheet below to calculate the value to enter on Line 26 of Form 1120, Other deductions.

Deductions(Expenses)	Amount
Total Deductions (Transfer to Line 26)

Question 3:

Complete Schedules M-1 and M-2 on the IRS Form 1120, U.S. Corporation Income Tax Return, below for InterTaxs first year of operations. Based on the data provided in the tab titled Information, enter the appropriate values in the shaded fields below. Note: The deduction for organizational expenses in the year was $5,707.

InterTax Inc. INCOME STATEMENT Tax Book Income Conslting fees Tax-exempt interest Interest income on bank accounts Total income 1,880,000 1,880,000 2,400 16,400 1,898,800 1,896,400 Expenses Organization expenses Officer salaries Salaries and wages Rent Utilities Advertising Repairs Taxes Employee benefits Interest Office supplies Depreciation Total expenses 5,707 800,000 240,000 76,800 12,000 30,000 2,000 10,000 2,000 10,000 7,000 15,600 800,000 240,000 76,800 12,000 30,000 2,000 10,000 2,000 10,000 7,000 30,400 1,235,800 663,000 1,270,707 625,693 Net income before contributions Charitable contributions Pre-tax income Federal tax expense Net income 563,124 583,000 191462 396,440 Note: There were no shareholder distributions during the year