Tax Return Assignment
Preparation of tax returns and related schedules can be very helpful in terms of integrating and applying tax concepts. To that end, please prepare the appropriate tax forms and schedules for the problem below. You may use the software provided with your textbook or prepare the forms by hand. Instructions for all forms and schedules may be obtained from the IRS website. A hard copy of your solution with schedules and forms in proper attachment order (stapled or clipped) is to be submitted by November 5th. Check figure: Taxable Income (line 30)= $427,770.
- On November 17, 2005, Casie Lynn and Kyle Allen formed LaBorne, Inc. to sell sporting goods. Pertinent information regarding LaBorne, Inc. is summarized as follows:
- LaBorne Inc.'s business address is 2120 Rebecca Lane, Great Falls, Montana 59401; its telephone number is (575) 541-1122; and its email address is [email protected].
- The employer identification number is 11-1111111, and the principal business activity code is 451110.
- Kyle is president of the company, and Casie is vice president.
- Kyle and Casie are full-time employees of LaBorne, Inc. Kyle's Social Security number is 123-45-6789, and Casie's Social Security number is 987-65-4321.
- LaBorne, Inc. is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. LaBorne, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.
- LaBorne, Inc.'s income statement for 2014 is shown on page 2.
- LaBorne, Inc.'s balance sheet is as follows:
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January 1, 2014
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December 31, 2014
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Cash
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1,200,000
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1,750,243
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Accounts receivable
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2,062,500
|
2,247,000
|
|
Inventories
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2,750,000
|
2,030,000
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|
Stock investment
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1,125,000
|
1,075,000
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|
State of Montana bonds
|
375,000
|
375,000
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|
Certificates of Deposit
|
400,000
|
400,000
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|
Prepaid federal tax
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0
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3,977
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Buildings and other depreciable assets
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1,805,000
|
2,305,000
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|
Accumulated depreciation
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(727,000)
|
(1,602,000)
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Land
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812,500
|
812,500
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|
Other assets
|
140,000
|
178,500
|
|
Total assets
|
9,943,000
|
9,575,220
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|
Accounts payable
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2,284,000
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2,416,694
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|
Other current liabilities
|
175,000
|
155,000
|
|
Mortgages
|
1,625,000
|
1,075,000
|
|
Capital stock
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2,500,000
|
2,500,000
|
|
Retained Earnings
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3,359,000
|
3,428,526
|
|
Total liabilities and equity
|
9,943,000
|
9,575,220
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|
Income Statement
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|
Income
|
|
|
|
|
Gross sales
|
|
|
5,900,000
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|
Sales returns and allowances
|
|
|
(70,000)
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|
Net sales
|
|
|
5,830,000
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|
Cost of goods sold
|
|
|
(3,100,000)
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|
Gross profit
|
|
|
2,730,000
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|
Dividends
|
|
|
18,000
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|
Interest income
|
|
|
|
|
State of Montana bonds
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15,000
|
|
|
|
Certificates of deposit
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27,500
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|
42,500
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|
Gain on sales of stock
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|
|
8,000
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Loss due to stock worthlessness
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|
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(27,000)
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|
Other income
|
|
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216,500
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|
Total income
|
|
|
2,988,000
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|
|
|
|
|
|
Expenses
|
|
|
|
|
Salaries and wages
|
|
805,000
|
|
|
Taxes (state, local, and payroll)
|
|
101,830
|
|
|
Interest expense
|
|
|
|
|
Loan to purchase municipal bonds
|
4,000
|
|
|
|
Funds borrowed for working capital
|
22,000
|
26,000
|
|
|
Warranty expense
|
|
9,300
|
|
|
Depreciation*
|
|
875,000
|
|
|
Charitable contributions
|
|
88,000
|
|
|
Premiums on key-man life insurance policies
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|
10,000
|
|
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Bad debt expense
|
|
9,800
|
|
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Other expenses
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|
435,000
|
|
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Total expenses
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|
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(2,359,930)
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|
Net income before taxes
|
|
|
628,070
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|
Federal income tax
|
|
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(213,544)
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|
Net income per books
|
|
|
414,526
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You are not provided enough detailed information to complete a Form 4562 (depreciation schedule). If you solve this problem using H&R Block At Home, you will have to override the depreciation expense by entering the amount of depreciation on line 20 of Form 1120.