Sophie musical sales, Inc. is located at 1001 Houston Texas 36830. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the dental business with an employer identification number (EIN) of 99-2046316. The company incorporated on December 31, 2015, and began business on January 2, 2016. Table 1 contains balance sheet information at January 1, 2019, and December 31, 2019. Table 2 presents an income statement for 2019. These statements are presented on a book basis. Other information precedes the tables.

Other information precedes the tables.

Inventory and Cost of Goods Sold (Form 1125-A):

The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected on Form 1125-A. No other costs or expenses are allocated to cost of goods sold. Note: the corporation is exempt from the uniform capitalization (UNICAP) rules because the average gross income for the previous three years was less than $26 million.

Line 9 (a)Check (ii)(b), (c), & (d) Not applicable(e) & (f)No

Compensation of Officers (Form 1125-E):

(a) (b) (c) (d) (f)

Daniel Jackson 123-45-6789 100% 70% $ 200,000

Alexis Little 987-65-4321 100% 15% 120,000

jane Hudon 111-22-3333 100% 15% 120,000

Total $440,000

Bad debts:

For tax purposes, the corporation uses the direct write-off method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts.

Addition Information (Schedule K):

1b Accrual 8 Do not check box

2a 621210 9 Fill in the correct amount

b Dentistry 10 3

c Dental Services 11 Do not check box

3 No 12 Not applicable

4a No 13 No

b Yes; Omit Schedule G 14 No

5a No 15a No

b No b Not applicable

6-7 No 16-25 No

Capital Gains and Losses:

The corporation sold 200 shares of Depot Corp. common stock on October 7, 2019, for $40,000. The corporation acquired the stock on December 15, 2018 for $50,000. The corporation also sold 75 shares of Heartland Corp. common stock on June 17, 2019 for $70,000. The corporation acquired this stock on September 18, 2017 for $50,000. The corporation has a $12,000 capital loss carryover from 2018. These transactions were not reported to the corporation on Form 1099-B.

Fixed Assets and Depreciation:

For book purposes: The corporation uses straight-line depreciation over the useful life of assets as follows: Store building, 50 years; equipment, 10 years; and trucks, 5 years. The corporation takes a half-year’s depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements in Tables 1 and 2 reflect these calculations.

For tax purposes: All assets are MACRS property as follows: Store building, 39-year non-residential real property; equipment, 7-year property; trucks, 5-year property. The corporation acquired the store building for $2 million and placed it in service on January 2, 2016. The corporation acquired two pieces of equipment for $300,000 (Equipment 1) and $500,000 (Equipment 2) and placed them in service on July 1, 2016. The trucks are not listed property and are not subject to the limitation on luxury automobiles. The corporation did not make the expensing election under Sec. 179 or take bonus depreciation on any property acquired before 2019. Accumulated tax depreciation through December 31, 2018, on these properties is as follows:

Store building      $151,780

Equipment 1          168,810

Equipment 2          281,350

Trucks                       26,000

On October 1, 2019, the corporation sold Equipment 1 for $340,000. The corporation had no Sec. 1231 losses from prior years. In a separate transaction on October 1, 2019, the corporation acquired and placed in service a piece of equipment costing $750,000. Assume these two transactions do not qualify as a like kind exchange. The new equipment is seven-year property. The corporation made the Sec. 179 expensing election with regard to the new equipment but elected out of bonus depreciation. They plan to take $500,000 of Sec. 179 expensing if allowed. Where applicable, use published IRS depreciation tables to compute 2019 depreciation.

Other Information:

Ignore accumulated earnings tax.

The corporation received dividends (see Income Statement in Table 2) from taxable, domestic corporations, the stock of which Bent Creek Dental, Inc. owns less than 20%.

The corporation paid $1,052,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings.

The state income tax in Table 2 is the exact amount of such taxes incurred during the year.

The corporation is not entitled to any credits.

Ignore the financial statement impact of any underpayment penalties incurred on the tax return.

Required: Prepare the 2019 corporate tax return for sophie musical, Inc. along with any necessary supporting schedules through taxable income.

Also can you upload how you got all the numbers included in the task return, like all the working

  

 

Transcribed Image Text:

January 1, 2019 Account Cash Accounts receivable Allowance for doubtful accounts Inventory Investment in corporate stock Investment in municipal bonds Cash surrender value of Insurance policy Land Buildings Accumulated depreciation- Buildings Equipment Accumulated depreciation- Equipment Trucks Accumulated depreciation- Trucks Account payable Notes payable (short-term) Accrued payroll taxes Accrued state income taxes Accrued federal income taxes Bonds payable (long-term) Net noncurrent deferred tax liability Capital stock Common Retained earnings- Unappropriated Totals Debit $117,833 202,000 2,000,000 168,000 24,000 45,000 350,000 2,000,000 800,000 50,000 $5.756,833 Credit $24,000 120,000 December 31, 2019 Debit 200,000 15,000 250,000 500,000 10,000 2,600 1,000 1,200,000 71,233 800,000 2,563,000 $5.756.833 $488,193 310,000 2,800,000 68,000 24,000 60,000 350,000 2,000,000 1,250,000 50,000 $7,400,193 Credit $20,000 160,000 193,750 25,000 220,000 400,000 12,000 5,000 84,532 900,000 217,083 800,000 4,362,828 $7.400.193 January 1, 2019 Account Cash Accounts receivable Allowance for doubtful accounts Inventory Investment in corporate stock Investment in municipal bonds Cash surrender value of Insurance policy Land Buildings Accumulated depreciation- Buildings Equipment Accumulated depreciation- Equipment Trucks Accumulated depreciation- Trucks Account payable Notes payable (short-term) Accrued payroll taxes Accrued state income taxes Accrued federal income taxes Bonds payable (long-term) Net noncurrent deferred tax liability Capital stock Common Retained earnings- Unappropriated Totals Debit $117,833 202,000 2,000,000 168,000 24,000 45,000 350,000 2,000,000 800,000 50,000 $5.756,833 Credit $24,000 120,000 December 31, 2019 Debit 200,000 15,000 250,000 500,000 10,000 2,600 1,000 1,200,000 71,233 800,000 2,563,000 $5.756.833 $488,193 310,000 2,800,000 68,000 24,000 60,000 350,000 2,000,000 1,250,000 50,000 $7,400,193 Credit $20,000 160,000 193,750 25,000 220,000 400,000 12,000 5,000 84,532 900,000 217,083 800,000 4,362,828 $7.400.193

Answer rating: 100% (QA)

Sophie Musical Sales Inc 2019 Tax Return Form 1120 Part I 1 Gross Receipts 4945000 2 Cost of Goods Sold 2890000 3 Gross Profit 2055000 4 Other Income Interest Income 0 Dividend Income 30000 Other Inco... View the full answer