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Alvin’s Music Inc. Essay Assignment
Alvin’s Music Inc. Essay Assignment
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Order Number |
636738393092 |
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Type of Project |
ESSAY |
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Writer Level |
PHD VERIFIED |
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Format |
APA |
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Academic Sources |
10 |
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Page Count |
3-12 PAGES |
Instructions/Descriptions
Professional Plagiarism Free Paper in APA/MLA/Harvard/Turabian Format, Instant Delivery, High Quality Submissions, 100% Unique, Turnitin Report Attached
Question Description
Complete Form 1120 for Alvin’s Music Inc., using the information provided below.
You need not complete Form 4797 for the sale of the equipment. Include the tax gain as other income on page one of Form 1120.
Alvin’s Music Inc. (AMI) was formed in 2006 by Alvin Jones and Theona Smith. Alvin and Theona incorporated AMI on June 12, 2007. AMI sells all kinds of music related products including musical instruments, sheet music, CDs and DVDs. Alvin owns 60% of the outstanding common stock and Theona owns the remaining 40%.
AMI’s address is 355 Music Way, East Palo Alto CA 94303 and its EIN is 29-5748859
AMI’s business activity is retail sales of music related products.
Alvin is the CEO and President. His SSN is 123-45-6789.
Theona is the Senior VP. Her SSN is 978-65-4321.
Gwen Givens is the VP of Operations. Her SSN is 321-54-6789.
Carlson Bannister is the Secretary. His SSN is 789-12-3456.
All officers devote 100% of their time to the business. Neither Gwen nor Carlson owns any stock.
AMI uses the accrual method of accounting and a calendar year. AMI made four equal estimated tax payments of $70,000 each. Its 2013 tax liability was $165,000.
AMI paid a cash dividend of $80,000 to its shareholders on December 1.
AMI
Income Statement
For the year ending December 31, 2016
| Revenue from sales | $3,420,000 |
| Sales returns and allowances | (40,000) |
| Cost of goods sold | (834,000) |
| Gross profit from operations | $2,546,000 |
| Dividend income (less than 20% owned) | 12,000 |
| Interest income | 15,000 |
| Capital gains | 8,000 |
| Gain from disposition of fixed assets | 2,000 |
| Gross income | $2,583,000 |
| Expenses | |
| Total compensation | 1,300,000 |
| Depreciation | 20,000 |
| Bad debt expense | 15,000 |
| Meals and entertainment | 5,000 |
| Maintenance | 5,000 |
| Charitable donations | 27,000 |
| Property taxes | 45,000 |
| State income taxes | 60,000 |
| Other taxes | 56,000 |
| Interest | 62,000 |
| Advertising | 44,000 |
| Professional services | 32,000 |
| Pension expenses | 40,000 |
| Supplies | 6,000 |
| Other expenses | 38,000 |
| Total expenses | 1,755,000 |
| Income before taxes | 828,000 |
| Federal income tax expense | 260,000 |
| Net income after taxes | 568,000 |
AMI has a capital loss carryover to this year of $5,000.
Ami’s inventory purchases were $1,134,000. AMI uses FIFO.
Of the $15,000 interest, $2,500 was from a city of Fremont bond, $3,500 was from a Pleasanton city bond, $3,000 was from a US Treasury bond and $6,000 was from a money market account.
AMI sold equipment for $10,000. The original purchase price was $12,000 and accumulated depreciation was $4,000 for book and $6,000 for tax.
On July 22, 2016, AMI sold 2,500 shares of stock for $33,000. The stock had been purchased April 24, 2006 for $25,000.
Compensation paid by AMI:
Alvin $210,000
Theona $190,000
Gwen $110,000
Carlson $90,000
Other $700,000
AMI wrote off $10,000 in accounts receivable this year.
Regular tax depreciation was $31,000.
Of the $62,000 interest expense, $56,000 was from the mortgage on the building and $6,000 was from business related loans.
The pension expense was the same for book and tax.
Other expenses included $3,000 for premiums on term key person life insurance on Alvin and Theona.
| January 1, 2016 | December 31, 2016 | |
| Assets | ||
| Cash | $240,000 | $171,000 |
| Accounts receivable | 600,000 | 700,000 |
| Allowance for doubtful accounts | (35,000) | (40,000) |
| Inventory | 1,400,000 | 1,700,000 |
| US government bonds | 50,000 | 50,000 |
| State and local bonds | 140,000 | 140,000 |
| Investments in stock | 300,000 | 275,000 |
| Building and equipment | 1,500,000 | 1,600,000 |
| Accumulated depreciation | (200,000) | (216,000) |
| Land | 900,000 | 900,000 |
| Other assets | 250,000 | 270,000 |
| Total assets | $5,145,000 | $5,550,000 |
| Liabilities & Equity | ||
| Accounts payable | $250,000 | $220,000 |
| Other current liabilities | 125,000 | 120,000 |
| Mortgages | 800,000 | 790,000 |
| Other liabilities | 200,000 | 162,000 |
| Capital stock | 600,000 | 600,000 |
| Retained earnings | 3,170,000 | 3,658,000 |
| Total liabilities & equity | $5,145,000 | $5,550,000 |
We would expect at least pages 1-5 of Form 1120, Form 1125-A, Form 1125-E, and Schedule G.
Taxable income on page 1, line 30 should be $810,100.
