Knoxville musical sales

by | Nov 17, 2021 | Homework Help

ProblemKnoxville musical sales, Inc. is located at 5500 Kingston Pike, Knoxville , TN 37919The 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 id number EIN of 75-2011009. The company incorporated on December 31, 2005 , and began business on January 2, 2006. table C:3-3 contains balance sheet information at January 1, 2009. and December 31, 2009. Table C:3-4 presents an income statement for 2009. These schedules are presented on a book basis. other information follows.Estimated Tax payments (Form 2220):The corporation deposited estimated tax payments as follows:$ 97,000196,000233,000233,000$759,000Taxable income in 2008 was $1,500,000, and the 2008 tax was $510,000. The corporation earned its 2009 taxable income evenly throughout the year. Therefore, it does not use the an or seasonal methods.Inventory and Cost of Goods sold( Schedule A):The corporation uses the periodic inventory method and prices its inventory, and purchases lower of FIFO cost market. Only beginning inventory, ending inventory, and purchases should be reflected in Schedule 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 $10 million.Knoxville Musical sales Inc. Book balance Sheet InformationDecember 31, 2009Credit$ 427,967459,000$ 39,0152,975,00085,00020,000 35,0001,000,00070,0001,450,000182,500200,000100,000400,00013,714270,000400,00015,93812,750103,0231,200,000285,802850,0003,536,653$7,065,681Check (ii)NoCompensation of officers (Schedule E):f$ 252,500150,000150,000$552,500Bad 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. during 2009, the corporation charged $34,000 to the allowance account, such amount representing actual write-offs for 2009.Additional information(Schedule K):NODo not check box3Do not check box12 Not Applicable13 No Knoxville musical sales, Inc. Book Income Statement 2009$ 8,500,000$ 8,287,500$2,125,0004,675,0002,975,000(3,825,000)$046,75038,250552,500340,00061,20040,80042,50025,50053,125178,50039,462(1,588,767)85,0004,25010,20016,000$ 2,989,183( 1,003,780)63,750Organizational Expenditures:The corporation incurred 6,800 $ of organizational expenditures on January 2, 2006. For book purposes, the corporation expensed the entire expenditure. For tax purposes, the corporation elected under sec. 248 to deduct $ 5,000 in 2006 and amortize the remaining $1,800 amount over 180 months., with a full months amortization taken for January 2006. The corporation reports this amortization in Part VI of form 4562 and includes it in “Other Deductions” on form 1120, line 26.Capital gains and losses:The corporation sold 100 shares of PDQ corp. common stock on march 7, 2009, for 75,000 $. The corp. acquired on December 15, 2008, for $ 45,000. The corporation also sold 75 shares of JSB Corp. common stock on June 17, 2009, for $ 46,000. The corporation acquired this stock on September 18, 2006, for $ 60,000. The corporation has an $ 8,000 capital carryover from 2008.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, 15 years(old) and ten years(new) 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 reflect these calculations.For tax purposes: All assets are MACRS property as follows: store building , 39 yearnonrezidential real property: equipment, seven year property: and trucks five year property, and trucks , five year property.The corporation acquired the store building for 1$milion and placed it in service on january 2, 2006. The corporation acquired two pieces of equipment for 300,000 Equipment 1 and 600,000Equipment2. and placed them in service on january 2,2006. The corporation acquired the trucks for $200,000 and placed them in service on July 18,2007. The corporation did not make the expensing election under sec. 179 on any property acquire before 2009. Accumulated tax depreciation through December 31, 2008, on these properties is as follows:Store buildings $75,890168,810337,620104,000On Nov. 16,2009. the corporation sold for $325,000 Equipment 1 that originally cost $300,000 on January 2,2006. the corporation had no sec.1231 losses from prior years. In a separate transaction on November 17,2009, the corporation acquired and placed in service a piece of equipment costing 850,000$These two transactions do not qualify as a like king exchange under reg. sec. 1.1031 (K)-1(a). The new equipment is seven year property. The corp. made the sec179 expensing election with regard to the new equipment and claimed bonus depreciation. Where applicable, use published IRS depreciation tables to compute 2009 depreciation( reproduced in Appendix C of this text).other informationThe corporation’s activities do not qualify for the US production activities deduction.Ignore the AMT and accumulated earnings tax.The corporation received dividends ( see income statement) from taxable, domestic corporations, the stock of which Knoxville Musical Sales, Inc. owns less than 20 %.The corporation paid 85,000$ in cash dividents to its shareholders during the year and charged the payment directly to retained earnings.The state income tax in is the exact amount of such taxes incurred during the year.The corporation is not entitled any credits.REQUIRED:PREPARE THE 2009 CORPORATE TAX RETURN FOR KNOXVILLE MUSICAL SALES,INC. ALONGWITH ANY NECESARY SUPPORTING SCHEDULES.OPTIONAL:prepare schedule M3 and schedule B as well as schedule M-1 even though the IRS does not require both scheduleM1 and schedule M3

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