Assignment task: Spotless Cleaners
Complete Form 1120-S for Spotless Cleaners. Do not elect the extra depreciation allowance and do not take any Section 179 deduction.
Spotless Cleaners, EIN 54-1556216, 9013 Castle Wood Rd., Your City, Your Town - Your Zip, a cleaning service which operates on an accrual basis, was incorporated January 10 of the current tax year and elected S corporation status. The corporation utilizes a calendar year.
Spotless has two shareholders: Michael Taylor, SSN 555-00-9654, 300 W. Graves Ave., Your City, Your Town - Your Zip, who owns 75% and purchased 150 shares for $75 par value; and Mary Jane Taylor, SSN 222-00-8965, same address, who is a 25% owner and purchased 50 shares for $75 par value. They received a cash distribution (divided according to percentage of ownership) of $15,000 on May 7 of the current tax year.
Spotless Cleaners borrowed $20,000 to cover expenses. $2,000 was payable on April 25 of the current tax year and $6,000 per year for the next three years. The accounts payable balance as of December 31 of the current tax year was $2,500. The accounts receivable balance as of December 31 of the current tax year was $1,000.
Spotless has two identical trucks (each weighs less than 6000 lbs. loaded) that are driven only for business. Michael contributed one truck and Mary Jane contributed the other one. A different person drives each truck.
Note: Assume the meals expense is not eligible for the increased 100% deduction.
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Vehicle Information
Vehicle
Date placed into service Cost
Miles driven during the year
Truck 1 03/01/current year
$12,000
3,634 miles
Truck 2 03/01/current year
$12,000
3,634 miles
Additional financial information for Spotless Cleaners is provided on the following page.
Spotless Cleaners Financial Information
Item Amount
Gross receipts $ 55,440
Returns and allowances $ 146
Interest income on receivables $ 1,000
Wages and salaries to employees $ 8,200
Repairs and maintenance $ 785
Taxes $ 1,000
Licenses $ 590
Rent on the building $ 2,400
Advertising expense $ 500
Charitable contributions to United Way $ 2,000
Voice mail $ 100
Bonding insurance $ 125
Workers' compensation insurance $ 1,000
Cell phone $ 111
Office expenses $ 1,250
Uniforms $ 228
Bank service charges $ 100
Gasoline and oil $ 2,500
Auto repairs $ 425
Airfare and hotels $ 500
Automobile insurance $ 1,000
Liability insurance $ 818
Retail Merchants membership $ 150
Cleaning and supplies $ 5,895
Parking and tolls $ 175
Accounting services $ 375
Subcontractor labor $ 1,750
Meals $ 220
Christmas gifts (20 persons @ $45/person) $ 900
Answer the following question based on Scenario 4. What is the amount of Schedule M-1, line 1?
a) $18,907 b) $20,907 c) $20,397 d) $18,397