Jane Collier, James Taye, and Steve Allwine each own one-third of the common stock of Tasty Treats and Beverages. The corporation was incorporated on April 3, 2004. It has only one class of stock outstanding and operates as a C corporation for tax purposes. Tasty Treats and Beverages caters kid-friendly social events.
- Located at 1215 Blue Horizon, Dallas, TX 12234.
- Employer Identification Number is 12-34567890.
- Business activity is catering food. Its business activity code is 722300.
- The shareholders also work as officers for the corporation as follows:
- Jane is the chief executive officer and president (Social Security number 242-62-5786).
- James is the executive vice president and chief operating officer (Social Security number 563-58-8923).
- Steve is the vice president of finance (Social Security number 575-58-1572).
- All officers devote 100% of their time to the business
- All officers are U.S. citizens.
- Use the accrual method of accounting and have a calendar year-end.
- Four equal estimated tax payments of $28,000 each quarter. Its tax liability last year was $85,000.
- If it has overpaid its federal tax liability, the corporation would like to receive a refund.
- Dividend paid of $20,000 to its shareholders on October 1. The Corporation had ample earnings and profits
(E&P) to absorb the distribution.
Financial Statements
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Tasty Treats and Beverages, Inc.
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Income Statement
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For year ended December 31, 2013
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Revenue from sales
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1,500,000
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Sales returns and allowances
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(25,000)
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Cost of goods sold
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(325,000)
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Gross profit from operations
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1,150,000
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Other Income:
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Capital loss
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(7,500)
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Dividend income
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15,000
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Interest income
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12,000
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Gross income
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1,169,500
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Expenses:
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Compensation
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(750,000)
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Depreciation
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(12,000)
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Bad debt expense
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(7,800)
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Meals and entertainment
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(3,000)
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Maintenance
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(2,500)
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Property taxes
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(10,000)
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State income taxes
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(30,000)
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Other taxes
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(11,000)
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Rent
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(28,000)
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Interest
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(7,300)
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Advertising
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(6,200)
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Professional services
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(5,000)
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Employee benefits
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(8,000)
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Supplies
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(2,500)
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Other expenses
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(1,750)
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Total expenses
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(885,050)
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Income before taxes
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284,450
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Federal income tax expense
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96,713
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Net income after taxes
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187,737
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Tasty Treats and Beverages, Inc.
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Balance Sheet
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December 31, 2013
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ASSETS
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Jan-13
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Dec-13
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Cash
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175,000
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190,000
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Accounts Receivable
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63,000
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54,000
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Allowance for doubtful accounts
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(8,000)
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(7,000)
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Inventory
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225,000
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275,000
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US government bonds
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30,000
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25,000
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State and local bonds
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50,000
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50,000
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Investments in stock
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325,000
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335,000
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Fixed assets
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475,000
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485,000
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Accumulated depreciation
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(198,000)
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(215,000)
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Other assets
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11,000
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12,000
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Total assets
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1,148,000
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1,204,000
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(Liabilities and Stockholder's Equity)
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Accounts payable
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225,000
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200,000
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Other current liabilities
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135,000
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55,000
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Other liabilities
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75,000
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68,263
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Capital stock
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250,000
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250,000
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Retained earnings
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463,000
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630,737
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Total liabilities and stockholder's equity
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1,148,000
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1,204,000
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Additional Information
- Inventory-related purchases during 2013 were $175,000. It values its inventory based on cost using the FIFO inventory cost flow method. Assume the rules of §263A do not apply.
- Of the $12,000 interest income, $1,500 was from a City of Dees bond that was used to fund public activities (issued in 2011), $1,750 was from an Border city bond used to fund private activities (issued in 2004), $2,500 was from a U.S. Treasury bond, and the remaining $6,250 was from a money market account.
- Dividend income came from ABC Inc. Owned 10,000 shares of the stock in ABC Inc. at the beginning of the year. This represented 10 percent of outstanding stock.
- On September 1, 2013, the corporation sold 1,000 shares of its ABC stock for $15,000. It had originality purchased these shares on June 13, 2006, for $7,500. After the sale, the Corporation owned 9 percent of ABC.
- compensation is as follows:
* Jane $175,000
* James $150,000
* Steve $150,000
* Other $275,000
- The Corporation wrote off $10,000 in accounts receivable as uncollectible during the year.
- Regular tax depreciation was $28,000. None of the depreciation should be claimed on Form 1125A.
- The $7,300 interest expense was from a business loan.
- Other expenses include $3,000 for premiums paid on term life insurance policies for which Tasty Treats and
Beverages, Inc. is the beneficiary. The policies cover the lives of Jane, James, and Steve.