Question :
GENERAL COMPANY INFORMATION
Margaret Brown and Joel Lee each own 50 percent of Designs Inc., with no other class of stock is authorized. On June 6, 2009, they formed to give design services. Their business activity code is 541400.
Designs Inc.'s business address is 2134 Merry Lane, Las Cruces, NM 08801. The telephone number is (575) 541-1122, and the e-mail address is [email protected].
The Eemployer identification number is 11-1111111. Margaret is the president of the company, and Joel is the vice- president. Margaret and Joel are the simply full-time designers employed by Designs, Inc., and they do all of the design services of the corporation. Margaret's Social Security number is 123-45-6789, and Joel's Social Security number is 555-48-9898.
Designs, Inc. is an accrual technique, calendar -year taxpayer. Designs, Inc. uses the straight-line technique of depreciation for both book and tax purposes. The corporation does not preserve any inventory.
Through the year, the corporation distributed cash dividends of $10,000.
The domestic production activities deduction (DPAD) for the year is $947. You are not provided sufficient detailed data to complete a Form 8903. Enter the amount of the DPAD on line 25 of Form 1120.
Through the year, Designs, Inc. made estimated tax payments of $1,500 each quarter to the IRS.
Designs, Inc. Income Statement
Income:
Design fees $739,000
Interest income (certificates of deposit) 2,700
Total income $741,700
Expenses:
Salaries--officers:
Margaret Brown $190,000
Joel Lee 190,000 $380,000
Salaries-clerical 61,000
Taxes:
Property 26,810
Payroll 23,280
State income 3,140
Other miscellaneous 2,390 55,620
Repairs and maintenance 16,340
Meals and entertainment 9,800
Travel 5,600
Charitable contributions 1,200
Interest expense on business loans 31,100
Advertising 17,650
Rental expense 9,270
Depreciation 35,910
Contributions to pension plans 31,000
Employee benefit programs 21,170
Accounting service 13,790
Dues and subscriptions 5,100
Insurance 17,750
Legal and professional services 11,000
Miscellaneous 4,360
Telephone 3,160
Total expenses (730,820)
Net income before taxes $ 10,880
Federal income tax (5,192)
Net income per books $ 5,688
Designs, Inc. Balance Sheet
Assets January 1, 2011 December 31, 2011
Cash $ 35,610 $ 42,580
Accounts receivable 45,100 43,300
Certificates of deposit 134,000 143,000
Depreciable assets 210,922 221,488
Accumulated depreciation (47,520) (83,430)
Land 42,000 42,000
Other assets 3,638 2,490
Total Assets $423,750 $ 411,428
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Liabilities and Equity January 1, 2011 December 31, 2011
Accounts payable $ 26,550 $ 27,497
Other current liabilities 15,110 17,853
Mortgages 126,000 114,300
Capital stock 200,000 200,000
Retained earnings 56,090 51,778
Total lLiabilities and Eequity $ 423,750 $ 411,428