Question: Corporate Income Tax Project
Instructions: Given the income statement and balance sheets of Fannie's Famous Fudge Inc. for calendar year 2017:
1. Use the book depreciation schedule to calculate the tax depreciation and accumulated tax depreciation (cost recovery) for each asset placed in service prior to 2017.
2. a. Calculate the tax gain/loss for each asset sold in 2017. Use total tax accumulated depreciation calculated in #1. Assume assets sold at same time as replacements are purchased.
b. Calculate the book/tax difference
3. a. Calculate tax depreciation expense for all assets placed in service in 2017. Use section 179 depreciation for all assets except for new vehicle and real estate. Business usage of new vehicle is 80%. Total miles travelled in 2017 8,000, total commuting miles 500. Van is 100% business use - total mileage for 2017 = 21,100 miles.
b. Calculate the book/tax difference
4. Calculate all other permanent/temporary book/tax differences. Note the following: direct bad debts write-offs for 2017 = $0. Officers' salaries include $10,000 bonus accrued on 12/31/16 to >50% shareholder which was paid to her on January 5, 2018.
5. Calculate tax expense per book, tax to be paid this year with the tax return and deferred tax liability/asset. Show your calculations (refer to Deferred Tax Worksheet)
6. Revise income statement and balance sheet using additional information calculated in #5.
7. Use the above information to complete Fannie's income tax return for 2017 using the following forms, available at www.irs.gov :
a. Form 1120, Pp. 1 & 5 (complete Schedules L, M-1 and M-2 on p. 5)
b. Schedule D (MAKE SURE IT'S THE SCHEDULE D FOR FORM 1120)
c. Form 4562 Pp. 1 & 2 (fill out sections A & B for both vehicles)
d. Form 4797 (Pp. 1&2)
8. Show supplementary schedules for the following:
a. Form 1120 page 1, line 25 "Other Deductions"
b. Any other item that you feel needs further detail display
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