Reference no: EM131642986

Question 1.

Master Corporation , an accrual-based calendar year taxpayer, had gross sales of $250000 in 2016. Of those sales , $2000 of goods were returned by their customers for various reasons. Master Corporation also agreed to give $500 in credits to customers for goods which were received (but kept by customers) in less than pristine condition.

On August 4, Master Corporation sold a vacant factory to an unrelated party for $3,000 which it had purchased on October 15, 1990. The factory had an original cost of $1,000 and over the years was given $750 in capital improvements. Accumulated depreciation ( which was the same for book and tax) in the date of sale was $1,150. Broker and other expenses on the sale amounted to $200. The purchaser agreed to pay Master Corporation $1,000 each in 2016,2017 and 2018.

Required: Complete form 1120, lines 1(a), 1(b) and 1(c) and form 6252.

Question 2.

Master Corporation values closing inventory at cost using Fifo and made no changes in Accounting for inventory during 2016. You have calculated that Master Corporation had $ 6000 of section 263 (a) costs in 2016 and that $800 of these costs belongs in the ending inventory.

On the 2015 tax return, you see that the ending inventory on the balance sheet ( Schedule L) was $40000 but on Schedule A ( Cost of goods sold) it was listed as $ 41,200

Required: Complete Schedule A of form 1120 plus lines 2 and 3 of form 1120, page 1.