AC507 TaxReturnsolutionPartB 3).docx (Protected View) Microsoft Word ReferencesM

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AC507 TaxReturnsolutionPartB 3).docx (Protected View) Microsoft Word ReferencesMailings Review View Snap-It-Open Corporation Income Statement For the Year Ending December 31, 2013 Sales Revenue Cost of Goods Sold (1) Gross Profit on Sales $1,935,000 428,000 $1,507,000 Expenses Salaries and Wages FICA FUTA(2) Rent Repairs and Maintenance Utilities Taxes and Licenses (exduding FICA and FUTA taxes) Health Insurance Advertising Travel (excluding meals) Meals and Entertainment Group Term Life Insurance Depreciation (3) Interest Expense Bad DebtExpense(4) $186,000 25,698 240,000 20,000 80,000 10,000 16,000 40,000 20,000 15,000 2,000 100,000 57,500 uaies and Licenses exdudng FICA and Total Expenses $656,102 Net Income Before Tax Cost of Goods Sold Beginning Inventorv - Purchases $360,000 5,000) 33,000) Purchase Returns Ending Inv entory Cost of Goods - Factory Salaries 5428,000 FICA-S292000x.0765-522.338 FUTA Sx $7,000x.06-3360 Total

Explanation / Answer

Solution:

      Snap -It Open Corporation

Income Statement

For the Year Ended December / 31 / 2013

Working Notes:

(1). Cost of Goods Sold   

Begining Inventory = 0

+ Purchase =3,60,000

- Purchase Returns = 5,000

- Ending Inventory = 33,000

+Factory Salaries = 1,06,000

Cost of Goods Sold = $ 4,28,000

(2). FICA = $2,92,000 * 0.765 = 22,338

   FUTA= 8 * 7,000 * 0.60 = 3,360

Total = $25,698

(3). Depreciation = (5,00,000 * 0.10) / (4,00,000 * .125) = 1,00,000

(4). Bd Debt = 0.2 * 19,35,000 = 38,700

Snap-It Open Corporation

Balance Sheet

For Year Ending December -31-2013

Particular Amount Amount Sales $19,35,000 Cost of Goods Sold 4,28,000 Gross Profit on Sales   $ 15,07,000 Expencess: Salaries and Wages 1,86,000 FICA/FUTA 25,698 Rent 2,40,000 Repairs and Maitanace 20,000 Utilities 80,000 Tax and Licencess(excluding Fica/Futa) 10,000 Health Insurence 16,000 Advertisments 40,000 Travellimg (excluding meals) 20,000 Meals and Entertainment 15,000 Group Team Life Insurence 2,000 Depreciation 1,00,000 Interest Expencess 57,500 Bad Debt Expencess 38,700 Totla Expencess   $ 8,50,898 Net Income Before Tax   $ 6,56,102

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