ACCT 553: Analysis of Bizrate Electronics 2018 Corporate Tax Return

This document presents a detailed analysis of Bizrate Electronics, Inc.'s 2018 corporate tax return (Form 1120), prepared as a project for ACCT 553. The assignment includes the calculation of taxable income, tax liability, and the preparation of supporting schedules such as Schedule D (Capital Gains and Losses), Schedule 1125-A (Cost of Goods Sold), Schedule 1125-E (Compensation of Officers), and Form 4797 (Sale of Business Property). The solution covers various aspects of corporate taxation, including depreciation, disallowed expenditures, capital gains and losses, and the treatment of dividends. The analysis also provides discussion and analysis of the key components of the return, along with references. The document includes a detailed calculation of the company's tax liability and the amount of refund due, along with explanations for each calculation. The assignment also includes the calculation of the basis in Bizrate's stock and assets. The document adheres to the guidelines provided in the assignment brief.

Running head: ACCT 553
Acct 553
Name of the Student:
Name of the University:
Authors Note:

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ACCT 553
Contents
Calculation of Form 1120:...............................................................................................................2
Calculation of Schedule D:..............................................................................................................4
Calculation of Schedule 1125-A:.....................................................................................................6
Calculation of Schedule 1125-E:.....................................................................................................6
Calculation of Form 4797:...............................................................................................................7
Discussion and analysis:..................................................................................................................8
References:....................................................................................................................................11
Appendix:......................................................................................................................................12

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ACCT 553
Calculation of Form 1120:
Computation of taxable income of business in form 1120
Calculation of taxable income of Bizrate Electronics
Particulars Amount ($) Amount ($)
Net income as per income statement of the company 381,400.
00
Add: Disallowed expenditures and taxable income not included
salaries paid to Jon Jones and Billy Burt not allowed as deduction 250,000.00
Depreciation 75,400.00
Interest to the extent related to investment in stock 2,500.00
Start-up expenses up to $5000 is allowed as deduction (6000 -5000) 1,000.00
Meals and entertainment expenses is not allowed as deduction 80,000.00
Federal income tax deposit is not an expenditure 250,000.00
Fines and penalties are not allowed as deduction 1,000.00
Insurance premium on the family of both Jon and Billy not allowed as
business expenditure
8,200.00
Taxable gain on sale of delivery truck (Note III) 10,950.00
679,050.

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ACCT 553
00
1,060,450.0
0
Less: Allowable expenditures not deducted and income included but not taxable as business income
Depreciation for tax purposes 112,700.00
Gain on sale of stock is not business income 4,000.00
Gain on sale of truck included in income tax 8,600.00
Interest on tax exempt bond is exempted 1,100.00
Dividends from US Corporation is not taxable 5,600.00
132,000.
00
Taxable income of business 928,450.
00
Calculation of tax liability on taxable income of business:
Corporations in US are subjected to a flat tax rate of 21% and accordingly the tax liability on the
amount of taxable income of $928,450 is calculated below.
Particulars Amount ($)
Taxable income 928,450.00

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ACCT 553
Tax liability @21% 194,974.50
Calculation of tax payable or refundable after adjusting deposit of Federal tax:
Particulars Amount ($)
Taxable income 928,450.00
Tax liability @21% 194,974.50
Less: Federal tax deposited 250,000.00
Tax payable / (Refund) (55,025.50)
Thus, the company has paid excess amount of tax hence, the amount to be refunded to Bizrate
Electronics from US Federal Government is $55,025.50.
Calculation of Schedule D:
Particulars Amount ($) Amount ($)
Short term capital gains and losses:
Profit on sale of delivery truck
Particulars Amount ($) Amount ($) Amount ($)

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ACCT 553
Sale proceeds from truck 35,000.00
Less: Cost basis at the date of sale of the truck
Cost of the truck 33,400.00
Less: Depreciation for tax
purpose
9,350.00
24,050.00
Short term capital gain 10,950.00
Sale proceeds from sale of Grand View Inc.'s shares 2,000.00
Less: Cost basis 3,000.00
Short term capital loss (1,000.00)
Sale proceeds of SBUX stock 35,000.00
Less: Cost basis 30,000.00
Short term capital gain 5,000.00
Calculation of Schedule 1125-A:
Calculation of cost of goods sold is provided below:
Schedule 1125-A
Particulars Amount ($) Amount ($)

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ACCT 553
Cost of goods sold:
Inventory at
beginning -
Purchases 4,050,000.
00
Labour
-
4,050,000.
00
Less: Ending
inventory
1,700,000.
00
Cost of goods sold 2,350,000.
00
Calculation of Schedule 1125-E:
Compensation paid to officers is shown below:
Schedule 1125-E
Particulars Amount ($) Amount ($)
Compensation to officers 980,00

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ACCT 553
(salaries) 0.00
Less: Compensation to owners
Jon Jones 200,000.00
Billy Burt 50,000.00
250,00
0.00
Compensation to officers 730,00
0.00
Calculation of Form 4797:
Sale of business property is shown below along with all relevant details required in from 4797:
Sale of business property
Property
description
date of
acquisition
Date of
sale
Gross sales
proceed
Depreciation Cost basis Gain or
(loss)
Deliver truck 01-May-18 23-
Sep-18
35,000.00 9,350.00 33,400.00 10,950.00
Discussion and analysis:
Note 1:

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ACCT 553
Salaries paid to the owners of Bizrate Electronics Inc. shall not be allowed as business
expenditures as there is no specific information about the professional qualifications of the
owners, i.e. Jon Jones and Billy Burt to deserve that kind of salary. Hence, it has been assumed
that the owners do not possessive such professional qualifications to deserve the salaries of
$200,000 and $50,000 respectively.
Note 2:
Depreciation for tax purposes is $112,700 will be allowed as deduction thus, this amount will be
deducted from revenue to ascertain the taxable amount of profit from business. The depreciation
charged in income statement shall be added back then to the income stated in the income
statement.
Note 3:
Interest expenses related to investments in stock shall not be allowed as business expenditure to
determine taxable income from business.
Note 4:
Start-up expenditure to the extent of $5,000 will be allowed as deduction hence, excess
organizing expenses of $1,000 shall be written back to the net income of the business to calculate
the taxable income of the business.
Note 5:
The premiums paid for the family of Jon and Billy are not related to business hence, these
premiums are not allowed as business expenditures. However, since the premiums paid for the

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ACCT 553
life insurance of Jon and Billy the same will be allowed as deduction since, the beneficiary in
both case is Bizrate Electronics Inc.
Note 6:
Capital gain on sale of SBUX stock is not business income hence, not to be included in
computation of taxable income of Bizrate Electronics Inc. The amount of gain included in
income statement of the company shall be deducted from net income to compute the taxable
income of business Bizrate (Azar, 2018).
Note 7:
Capital gain on sale of delivery truck is subjected to business income hence, the amount of
capital gain on sale of delivery truck is calculated below and to be added to the net income
instead of the gain shown in the income statement.
Gain on sale of delivery truck
Particulars Amount ($) Amount ($)
Sale proceeds from truck 35,000.00
Less: Cost basis at the date of sale of the truck
Cost of the truck 33,400.00
Less: Depreciation for tax purpose 9,350.00
24,050.00

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Gain on sale of delivery truck 10,950.00
Thus, gain on sale of delivery truck of $10,950 shall be included in computing the taxable
income of Bizrate Electronics from its business operations for the year 2018.
Note 8:
Dividend from US Corporations in which Bizrate has less than 20% holdings are not to be
included to compute the taxable business income of the company hence, the amount of dividend
included in income statement must be deducted from net income to ascertain the taxable net
income from business to determine the tax liability of the company.
Note 9:
In case of computation of tax liability of Bizrate electronics Inc. for 2018 the flat rate of tax
applicable for corporations in the country, i.e. 21% shall be used to determine the amount of tax
liability for the business income and further by adjusting the amount of federal tax deposited by
the company the resultant amount of tax payable or refundable by / to the organization has been
calculated (McGee, 2017).

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ACCT 553
References:
Azar, S. (2018). US Taxation. Tax Review, 3(3), 387-415. doi: 10.1111/opec.12008
McGee, R. (2017). US tax Form 1120 and related guidelines. SSRN Electronic Journal, 2(2), 12-
30. doi: 10.2139/ssrn.242565