THE ANSWER INITALLY GIVEN BY AN "EXPERT" WAS WRONG. THESE ARE NEW NUMBERS FOR THE NEW BOOK. PLEASE HELP AND REWORK.

PLEASE NOTE THESE ARE NOT THE SAME NUMBERS AS THE PREVIOUS VERSION...NEW NUMBERS

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Question: C:3-66 Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporat...

C:3-66 Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of XX-2018016. The company incorporated on December 31, 2012, and began business on January 2, 2013. Table C:3-4 contains balance sheet information at January 1, 2016, and December 31, 2016. Table C:3-5 presents an unaudited GAAP income statement for 2016. These schedules are presented on a book basis. Other information follows the tables.

Estimated Tax Payments (Form 2220):

The corporation deposited estimated tax payments as follows:

3.1-79 Full Alternative Text

Table C:3-4 Melodic Musical Sales, Inc.Book Balance Sheet Information

Table C:3-4 Full Alternative Text

Taxable income in 2015 was $1.6 million, and the 2015 tax was $544,000. The corporation earned its 2016 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods.

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 average gross income for the previous three years was less than $10 million.

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

Compensation of Officers (Form 1125-E):

3.1-81 Full Alternative Text

Bad Debts:

For tax purposes, the corporation uses the direct writeoff method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2016, the corporation charged $38,000 to the allowance account, such amount representing actual writeoffs for 2016.

Table C:3-5 Melodic Musical Sales, Inc.Book Income Statement 2016

Table C:3-5 Full Alternative Text

Additional Information (Schedule K):

1 b	Accrual
2 a	451140
?b	Retail sales
?c	Musical instruments
3	No
4 a	No
?b	Yes; omit Schedule G
5 a	No
?b	No
6-7	No
8	Do not check box
9	Fill in the correct amount
10	3
11	Do not check box
12	Not applicable
13-14	No
15a	No
b	Do not check box
16-19	No

Organizational Expenditures

The corporation incurred less than $5,000 of organizational expenditures in the year it began business. For book purposes, the corporation expensed the entire expenditure. For tax purposes, the corporation elected under Sec. 248 to deduct the entire amount of expenditures in the year it began business. Therefore, no amortization expenditures appear in the tax return or book financial statements for the current year.

Capital Gains and Losses:

The corporation sold 100 shares of PDQ Corp. common stock on October 7, 2016, for $150,000. The corporation acquired the stock on December 15, 2015, for $100,000. The corporation also sold 75 shares of JSB Corp. common stock on June 17, 2016 for $120,000. The corporation acquired this stock on September 18, 2014, for $135,000. The corporation has a $20,000 capital loss carryover from 2015. 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 lives of assets as follows: store building, 50 years; equipment, ten years; and trucks, five years. The corporation takes a half-years depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements in Tables C:3-4 and C:3-5 reflect these calculations.

For tax purposes: All assets are MACRS property as follows: store building, 39-year nonresidential real property; equipment, seven-year property; and trucks, five-year property. The corporation acquired the store building for $2 million and placed it in service on January 2, 2013. The corporation acquired two pieces of equipment for $400,000 (Equipment 1) and $800,000 (Equipment 2) and placed them in service on January 2, 2013. The corporation acquired the trucks for $200,000 and placed them in service on July 18, 2014. 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 2016. Accumulated tax depreciation through December 31, 2015, on these properties is as follows:

Store building	$151,780
Equipment 1	225,080
Equipment 2	450,160
Trucks	104,000

On October 16, 2016, the corporation sold for $440,000 Equipment 1 that originally cost 400,000 on January 2, 2013. The corporation had no Sec. 1231 losses from prior years. In a separate transaction on October 17, 2016, the corporation acquired and placed in service a piece of equipment costing $1,500,000. 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. Where applicable, use published IRS depreciation tables to compute 2016 depreciation (reproduced in Appendix C of this text).

Other Information:

The corporations activities do not qualify for the U.S. production activities deduction.

Ignore the AMT and accumulated earnings tax.

The corporation received dividends (see Income Statement in Table C:3-5) from taxable, domestic corporations, the stock of which Melodic Musical Sales, Inc. owns less than 20%.

The corporation paid $95,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings.

The state income tax in Table C:3-5 is the exact amount of such taxes incurred during the year.

The corporation is not entitled any credits.

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

Required: Prepare the 2016 corporate tax return for Melodic Musical Sales, Inc. along with any necessary supporting schedules.