On May 1, 1989, Brendan McLeod and Duncan Ryan formed Angler Corporation to sell
ID: 2542454 • Letter: O
Question
On May 1, 1989, Brendan McLeod and Duncan Ryan formed Angler Corporation to sell fishing tackle. Pertinent information regarding Angler is summarized as follows:
The business address is 3027 Woodland Ridge Blvd., Baton Rouge, Louisiana 70816.
The employer identification number is 75-3392543; the principal business activity code is 451110.
Brendan and Duncan each own one-half of the outstanding common stock; no other class of stock is authorized. Brendan is president of the company, and Duncan is secretary-treasurer. Both are full-time employees of the corporation, and each receives a salary of $140,000. Brendan’s Social Security number is 145-26-2593. Duncan’s Social Security number is 287-43-4945.
The corporation uses the accrual method of accounting and reports on a calendar basis. Inventories are determined by using the lower of cost or market method. For book and tax purposes, the straight-line method of depreciation is used.
During 2017, the corporation distributed a cash dividend of $80,000.
Selected portions of Angler’s profit and loss statement of 2017 reflect the following debits and credits:
Account
Debit
Credit
Gross sales
$2,190,000
Sales returns and allowances
$80,000
Cost of goods sold
950,000
Dividends received from stock
investments in less than 20%
owned U.S. corporations
120,000
Interest income
State bonds
$14,000
Certificates of deposit
10,000
24,000
Premiums on term life insurance
policies on the lives of Brendan
and Duncan; Angler Corporation
is the designated beneficiary
11,000
Salaries-officers
280,000
Salaries-clerical and sales
290,000
Taxes (state, local, and payroll)
39,000
Repairs
29,000
Interest expense
18,000
Fines for dumping toxic waste
9,000
Advertising
6,000
Rental Expense
38,000
Depreciation
40,000
A comparative balance sheet for Angler Corporation reveals the following information:
Assets
January 1, 2017
December 31, 2017
Cash
$480,000
$334,100
Trade notes and accounts receivable
808,200
1,060,600
Inventories
600,000
736,000
Certificates of Deposit
130,000
130,000
State bonds
170,000
170,000
Prepaid Federal tax
---
2,800
Buildings and other depreciable assets
240,000
240,000
Accumulated depreciation
(88,800)
(128,800)
Land
20,000
20,000
Other assets
3,600
1,000
Total assets
$2,363,000
$2,565,700
Liabilities and Equity
Accounts payable
$340,000
$273,000
Other current liabilities
57,860
41,000
Mortgages
220,000
200,000
Capital stock
500,000
500,000
Retained earnings
1,245,140
1,551,700
Total liabilities and equity
$2,363,000
$2,565,700
Net income per books (before any income tax accrual) $544,000
Income Tax Expense 157,440
Net Income $386,560
During 2017, Angler Corporation made estimated tax payments of $160,240 to the IRS. Prepare a Form 1120 for Angler Corporation for tax year 2016. Include Forms 1125-A, 1125-E and Schedule G (Form 1120).
Account
Debit
Credit
Gross sales
$2,190,000
Sales returns and allowances
$80,000
Cost of goods sold
950,000
Dividends received from stock
investments in less than 20%
owned U.S. corporations
120,000
Interest income
State bonds
$14,000
Certificates of deposit
10,000
24,000
Premiums on term life insurance
policies on the lives of Brendan
and Duncan; Angler Corporation
is the designated beneficiary
11,000
Salaries-officers
280,000
Salaries-clerical and sales
290,000
Taxes (state, local, and payroll)
39,000
Repairs
29,000
Interest expense
18,000
Fines for dumping toxic waste
9,000
Advertising
6,000
Rental Expense
38,000
Depreciation
40,000
Explanation / Answer
Name of the Assesee: Angler Corporation Financial Year: 2016-17 Status:Company Assessment Year:2017 -18
Income from Business- 5,44,000
Add: depreciation as per cos Act:40,000
Less:Dividend:1,20,000 (Exempted income)
Less: interest income:24,000
Gross Total Income:4,40,000
Less: Depreciation as per Tax:40,000
Total Income:4,00,000
Income from other sources
Interest income:24,000
Gross Total income=4,24,000
Tax=1,57,440
Total income= 2,66,560
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