FACTS
Valerie Lawson and Clara Norman are the sole equal shareholders in the corporation of Lawson And Norman Enterprises, Inc. The corporation, which is a retail office supplies and stationery store, began its operations on January 2, 1985 (also date of incorporation). For Federal Income Tax purposes, the corporation is a calendar year taxpayer and uses the Accrual Method Of Accounting.
FINANCIAL INFORMATION
During the year of 2013, Lawson And Norman Enterprises, Inc. reported the following Income and Expenses (including necessary accruals) for Financial Accounting purposes:
Gross Receipts $1,482,000
Sales Returns And Allowances 109,000
Purchases 510,000
Dividends Received From Stock (Not Qualified Dividends)
Investments In Less Than twenty percent (20%)
Owned United States (U. S.) Corporation 80,000
Interest Income:
Taxable Interest 18,000
Tax-Exempt Interest 7,200
Salaries: Officers 150,000
Other Employees 108,000
Repairs And Maintenance 19,300
Rent Expense - Office 84,000
Rent Expense - Equipment 15,500
Payroll Taxes (Federal And State) 19,600
Interest Expense 25,200
Advertising Expense 44,500
Charitable Contributions 48,000
Legal And Professional Fees 28,800
Depreciation Expense 50,000 *
Utilities Expense 27,300
Employee's Health Insurance Premiums 14,200
Entertainment Of Clients 5,000
Officers' Life Insurance Premiums 14,400 **
* - Based upon Straight-Line Depreciation, a useful life of five (5) years and no salvage value for all assets (see specific assets below).
** - Lawson And Norman Enterprises, Inc. Is The Designated Beneficiary.
The Lawson And Norman Enterprises, Inc. owns the following depreciable assets:
ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST
Automobile - 2012 Lexus 460 April 1, 2012 $ 50,000
(Five-year Property)
Automobile - 2012 Cadillac Seville April 1, 2012 50,000
(Five-year Property)
Furniture And Fixtures May 1, 2011 150,000
(Seven-year Property)
Each automobile was used a total of 18,000 miles during the year of 2013 all which were business miles. The automobiles were not available for personal use during off-duty hours and were used solely by Valerie Lawson and Clara Norman, who both have another vehicle available for personal use. For Federal Income Tax purposes, all of these assets are depreciated using the Modified Accelerated Cost Recovery System (MACRS). Section 179 Deduction was not elected in regards to any of these assets nor was Straight-Line Depreciation used.
BALANCE SHEETS
The Balance Sheets (Financial Accounting) for the Lawson And Norman Enterprises, Inc. at the beginning and ending of the year of 2013 are as follows:
ASSETS January 1 December 31
Cash $ 36,000 $ 84,000
Trade Notes And Accounts Receivable 96,000 90,000
Inventory (Valued At Cost) * 120,000 100,000
Marketable Securities - Long Term 140,000 170,000
Depreciable Assets (And Land) 260,000 ** 260,000 **
Less: Accumulated Depreciation (65,000) (115,000)
Other Assets (Deposits) 12,000 12,000
------------ -------------
TOTAL ASSETS $ 599,000 $ 601,000
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable (Non Recourse) $ 96,000 $ 116,200
Federal Income Taxes Payable 8,600 ?
Notes Payable - Short Term (Recourse) 16,000 24,000
Notes Payable - Long Term (Recourse) 164,000 212,000
Common Stock 10,000 10,000
Retained Earnings (Unappropriated) 304,400 229,042
TOTAL LIABILITIES AND ------------ ------------
STOCKHOLDERS' EQUITY $ 599,000 $ 601,000
======= =======
* - The rules of Section 263A of the Internal Revenue Code do not apply to the corporation.
** - Includes $10,000 allocated to Land.
-2-
ESTIMATED TAX PAYMENTS
During 2013, Lawson And Norman Enterprises, Inc. made the following estimated tax payments:
April 15, 2013 $30,000
June 17, 2013 $20,000
September 16, 2013 $20,000
December 16, 2013 $10,000
The 2012 Federal Income Tax liability for Lawson And Norman Enterprises, Inc. was $76,800 and no overpayment of 2012 Federal Income Tax is being applied to the 2013 Federal Income Tax liability of Lawson And Norman Enterprises, Inc.
REQUIRED
Prepare the C (Regular) Corporation Tax Return for the Lawson And Norman Enterprises, Inc. for the tax year of 2013. The following Forms are needed to complete the Tax Return:
Form 1120
Form 1125-A
Form 1125-E
Schedule G
Form 4562
Form 4626
The Income Tax Return is due on DECEMBER 6, 2014.