Order ID |
53563633773 |
Type |
Essay |
Writer Level |
Masters |
Style |
APA |
Sources/References |
4 |
Perfect Number of Pages to Order |
5-10 Pages |
Description/Paper Instructions
Analyzing Zeus, Inc.’s Tax Return for Errors
Week 5 Assignment – Analyzing a Corporate Tax Return
Overview
You are a senior tax accountant in the firm, Ernest & Rainhouse. Joe, a new junior accountant, has just prepared his first corporate tax return for Zeus, Inc. The electronic filing system has rejected the Zeus, Inc.’s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF]EditSign due to errors and omissions. Joe is seeking your help in determining his mistakes and in answering some corporate tax questions he is unsure about. You are to read the scenario below and then follow the instructions.
Scenario
Zeus, Inc. is organized as a corporation and is taxed as a C corporation with a calendar year end. Zeus, Inc. owns and operates an amusement park in Los Angeles, California. Zeus, Inc.’s address, employer identification number (EIN), and date of incorporation are as follows:
- Zeus, Inc.
- 77 Sunset Strip.
- Los Angeles, CA 90028.
- EIN: 56-1234567.
- Date incorporated: July 1, 2010.
Zeus, Inc. is owned by 77 shareholders. No person or entity owns directly 20% or more, or owns, directly or indirectly, more than 50% of the voting stock of Zeus, Inc. No one is from outside of the United States.Zeus, Inc. uses the accrual method of accounting. Zeus, Inc. is not audited by a CPA firm. It does, however, use GAAP-based financial statements and has never had a restatement of its income statement.Zeus, Inc. reported the following information for 2020:
- Zeus, Inc. made payments that required it to file federal form(s) 1099. The 1099s were filed timely.
- Zeus, Inc. average annual gross receipts for the prior three years are under $26,000,000.
- Zeus, Inc. elects to file a complete Schedule M-3 even if only M-1, or a partial M-3, is required.
Additional Information Used in the Preparation of Zeus, Inc. Financial Statements:
- On August 1, 2020, Zeus, Inc. was notified by its legal counsel that Zeus, Inc. was being sued by a former employee regarding her termination of employment from Zeus, Inc. On December 21, 2020, a legal settlement was reached with this terminated employee. As part of the settlement, Zeus agreed to pay the employee a settlement amount of $190,000 on January 10, 2021. Zeus, Inc. accrued this expense on its 2020 financial statements.
- Zeus, Inc. owns 12% of Fun Fair of Russia, a Russian corporation operating a theme park on the outskirts of Moscow. Fun Fair of Russia remitted dividends to Zeus, Inc. of $14,000. Zeus, Inc. also received $300 in dividends from holding marketable securities (all less than 20% owned by Zeus, Inc.).
- From inception until this year, Zip Coaster has been Zeus’s main attraction, but it aged and lost appeal. Zeus, Inc. purchased a new attraction known as the Swirlwind. The Swirlwind was installed and placed in operation on March 1, 2020, at a cost of $6,000,000 to acquire and place into service.
- Zeus, Inc. rents its amusement equipment from vendors. As of December 31, 2019, and December 31, 2020, respectively, Zeus, Inc. has prepaid vendors for equipment rental of $30,000 for January 2020 and $35,000 for January 2021.
- On December 26, 2020, Zeus, Inc. prepaid a contractor $17,500 to repair three pieces of maintenance shop equipment. Zeus, Inc. fully expects that the contractor will have completed the project by January 31, 2020.
- As of December 31, 2019, and 2020, respectively, Zeus, Inc. had vacation accruals on its books of $29,000 and $35,000.
- On December 2, 2020, Zeus, Inc. held an advertising give-away of $100,000.
- Zeus, Inc. rents part of their unused land. Zeus, Inc. received a check for $50,000 on December 27, 2020, for 6-months rental beginning January 1, 2021. The lease contains a clause that the rent is nonrefundable to the renter under any circumstances.
- During the year, Zeus, Inc. made the following estimated tax payments:
Estimated Tax PaymentsDateFederal Estimated Tax PaymentCalifornia Estimated Tax Payment4/15/2020$72,500$15,0006/15/2020$72,500$15,0009/15/2020$72,500$15,00012/15/2020$72,500$15,000
- On December 1, 2020, Zeus Inc. paid $400,000 dividends to all common stockholders.
Additional Information Used in the Preparation of Zeus, Inc. Corporate Tax Return:
- Zeus, Inc. maintains a portfolio of tax-exempt securities and publicly traded stocks as a measure to provide immediate liquidity if needed. All of these securities originate from less than 20% owned domestic corporations. Zeus, Inc. paid an attorney $10,000 in obtaining the tax-exempt securities.
- Zeus’s regular tax depreciation for the year is correctly calculated as $1,112,499 (from previous year’s purchases) before considering the 2020 addition of the Swirlwind. Because of the Swirlwind’s modular design, it is considered personal property. (Not real property.)
- Near the end of the year, Zeus, Inc. switched its property and casualty insurance company. As a result, the plan year for its insurance contract was altered. On December 31, 2020, Zeus, Inc. prepaid insurance premiums of $25,000 representing coverage through February 15, 2021, as a condition of being accepted by the new company. Zeus, Inc. did not expense any of the prepayments for financial accounting purposes.
Zeus, Inc.’s officer information for the year is as follows: (Compensation amounts included in total wages on the income statement for all employees.)Officer InformationNameSocial Security #% of Time Devoted to Business% of Stock OwnedAmount of CompensationMargo Harrington123-45-6789100%.05%$235,000Dean Williams987-65-4321100%.03%$195,000Dennis Johns456-78-9321100%0%$165,000Jamie Conway321-45-6978100%0%$150,000
- All the accrued wages and bonus amounts on the financial statements as of December 31, 2019, were paid on February 28, 2020.
- The winner of the advertising give-away of $100,000 was presented the check on January 15, 2021.
- As of March 15, 2020, and 2021, respectively Zeus, Inc. had paid $5,000 and $8,000 of the vacation accrued amounts.
Zeus, Inc. Financial Statements:
Balance SheetZeus, Inc. Balance SheetAs of Dec. 31, 2019As of Dec. 31, 2020Assets:Cash165,000119,000Accounts Receivable128,00075,000Less: Allowance for Doubtful Accounts(43,000)(49,000)Inventory422,000390,000Tax-exempt Securities150,000150,000Publicly Traded Stocks200,000200,000Fixed Assets24,000,00028,000,000Less: Accumulated Depreciation(13,542,000)(12,892,000)Prepaid Insurance25,000Prepaid Rent30,00035,000Prepaid Contractors17,500Other Assets150,000250,000Total Assets11,660,00016,320,500Liabilities & Stockholders’ Equity:Accounts Payable48,00062,000Accrued Wages123,000118,000Accrued Bonuses68,50039,000Accrued Vacation29,00035,000Legal Settlement Accrual-190,000Prize Accrual-100,000Unearned Rental Revenue-50,000Notes Payable – Short Term1,540,0001,084,000Notes Payable – Long Term7,112,00011,728,000Capital Stock100,000100,000Additional Paid-in Capital2,000,0002,000,000Retained Earnings639,500814,500Total Liabilities & Stockholders’ Equity11,660,00016,320,500Income StatementZeus, Inc. Income StatementFor the Year Ended December 31, 2020Income:Sales26,523,275Less: Sales Returns & Allowances(113,500)Net Sales26,409,775Cost of Goods Sold(2,052,500)Gross Margin24,357,275Other Income:Dividend Income14,300Interest Income2,650Municipal Bond Interest Income2,30019,250Total Income:24,376,525Expenses:Employee Salaries13,905,600Repairs & Maintenance492,350Bad Debts58,000Rent1,543,000Payroll Taxes1,112,400Licensing Fees10,750Property Taxes277,000Interest Expense781,000Depreciation1,350,000Office Supplies33,950Employee Training53,750Safety Expenses31,000Political Contribution2,500CA Safety Commission Fine5,000Advertising290,500Admission Supplies143,250Attorney Fees10,000Meals & Entertainment8,500Travel13,550Insurance215,000Legal Settlement190,000Prize Contest Expense100,000Fuel158,675Utilities2,530,500Telephone135,250Total Expenses Before Taxes23,451,525CA Income Tax Expense60,000Federal Tax Expense290,000Total Income Taxes350,000Net Income:575,000
Instructions
Write 3-5 page paper in which you do the following:
- Identify at least three errors or omissions on the Zeus, Inc.’s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF]EditSign, justifying selections with IRS codes, IRS regulations, court cases, or FASB statements.
- Explain the criteria that requires the use of M-3 and describe how it is more beneficial to the financial statement user.
- Explain at least two IRS approved methods available to Zeus Inc. to make estimated tax payments, explaining and justifying the preferred method.
- Explain the relationship of a corporation’s tax year and their financial reporting year, explaining at least two complications. Provide how to mitigate the two complications that might arise in preparing Zeus Inc’s income tax provision for the financial statements.
- Use at least two quality sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.
- Writing contains accurate grammar, mechanics, and spelling in accordance with SWS style.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.The specific course learning outcomes associated with this assignment:
- Analyze a corporate tax return to collect the required information for the preparation of a corporate tax return.
Week 5 Assignment – Analyzing a Corporate Tax Return
RUBRIC
QUALITY OF RESPONSE |
NO RESPONSE |
POOR / UNSATISFACTORY |
SATISFACTORY |
GOOD |
EXCELLENT |
Content (worth a maximum of 50% of the total points) |
Zero points: Student failed to submit the final paper. |
20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. |
30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. |
40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. |
50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. |
Use of Sources (worth a maximum of 20% of the total points). |
Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. |
5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. |
10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. |
15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. |
20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. |
Grammar (worth maximum of 20% of total points) |
Zero points: Student failed to submit the final paper. |
5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors |
10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors |
15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. |
20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. |
Structure of the Paper (worth 10% of total points) |
Zero points: Student failed to submit the final paper. |
3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. |
5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper |
7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. |
10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. |
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