Question

• Based on the given information (Links to an external site.) Can you please prepare the 2018 Form 1120 for Bizrate Electronics with the accompanying Schedule D, 1125-A, 1125-E, and Form 4797. Also, provide calculations for Jon and Billy's basis in Bizrate's stock and Bizrate basis in the new assets it holds. Depreciation will be a given number. ?

Bizrate Electronics, Inc.

A “C” Corporation

For the Year Ended December 31, 2018

               Bizrate Electronics was organized on February 22, 2018, by Jon Jones and Billy Burt. Jon contributed $270,000 cash and SBUX stock (acquired 01/01/2017) worth $30,000 for 60% of Bizrate stock, while Billy contributed $200,000 cash for 40% of the stock. Jon’s social security number is 123-45-6789 and Billy’s is 987-65-4321. Bizrate’s employer ID number is 12-3456789. Bizrate began business on March 1, 2018. Bizrate is a retail electronics outlet located at 118812 Josey Lane, Louisville, KY 40018. Bizrate uses the accrual method of accounting, the first-in, first-out (FIFO) inventory method, and a calendar year.

               Bizrate’s 2018 income statement, balance sheet, and statement of changes in retained earnings are on the following pages

Bizrate Electronics, Inc. Income Statement For the Year Ended December 31, 2018 Sales Returns and Allowances 4,700,000 (50,000) 4,650,000 Beginning Inventory Purchases 4,050,000 4,050,000 (1,700,000) Ending Inventory Gross Profit Expenses (2,350,000) 2,300,000 Salaries (a) Depreciation (b) Advertising Bad Debts Rent Interest (c) Utilities Delivery Expense Office Supplies Repairs and Maintenance Organization Expense (d) Meals and Entertainment Insurance Expense (e) Payroll Taxes 2018 Federal Income Tax Deposits Other Taxes Fines and Penalties (Traffic) Accounting and Legal Charitable Contributions - Red Cross Real Estate Taxes on Investment Land 980,000 75,400 30,000 39,000 100,000 39,500 38,300 34,900 46,200 29,000 6,000 80,000 36,000 113,300 250,000 20,000 1,000 12,000 18,000 800 1,949,400 350,500 Other Income Gain on Sale of Stock (f) Sale of Delivery Truck (5) Interest on County Tax Exempt Bonds Interest on CDs Dividends from US Corporations (h) 4,000 8,600 1,100 11,500 5,600 30,800 381,400 Net Income

Answer 1

Bizrate Electronics, Inc.

A “C” Corporation

For the Year Ended December 31, 2018

               Bizrate Electronics was organized on February 22, 2018, by Jon Jones and Billy Burt. Jon contributed $270,000 cash and SBUX stock (acquired 01/01/2017) worth $30,000 for 60% of Bizrate stock, while Billy contributed $200,000 cash for 40% of the stock. Jon’s social security number is 123-45-6789 and Billy’s is 987-65-4321. Bizrate’s employer ID number is 12-3456789. Bizrate began business on March 1, 2018. Bizrate is a retail electronics outlet located at 118812 Josey Lane, Louisville, KY 40018. Bizrate uses the accrual method of accounting, the first-in, first-out (FIFO) inventory method, and a calendar year.

               Bizrate’s 2018 income statement, balance sheet, and statement of changes in retained earnings are on the following pages

Bizrate Electronics, Inc. Income Statement For the Year Ended December 31, 2018 Sales Returns and Allowances 4,700,000 (50,000) 4,650,000 Beginning Inventory Purchases 4,050,000 4,050,000 (1,700,000) Ending Inventory Gross Profit Expenses (2,350,000) 2,300,000 Salaries (a) Depreciation (b) Advertising Bad Debts Rent Interest (c) Utilities Delivery Expense Office Supplies Repairs and Maintenance Organization Expense (d) Meals and Entertainment Insurance Expense (e) Payroll Taxes 2018 Federal Income Tax Deposits Other Taxes Fines and Penalties (Traffic) Accounting and Legal Charitable Contributions - Red Cross Real Estate Taxes on Investment Land 980,000 75,400 30,000 39,000 100,000 39,500 38,300 34,900 46,200 29,000 6,000 80,000 36,000 113,300 250,000 20,000 1,000 12,000 18,000 800 1,949,400 350,500 Other Income Gain on Sale of Stock (f) Sale of Delivery Truck (5) Interest on County Tax Exempt Bonds Interest on CDs Dividends from US Corporations (h) 4,000 8,600 1,100 11,500 5,600 30,800 381,400 Net Income

Bizrate Electronics, Inc. Notes to Income Statement a. Includes salaries: Jon Jones $200,000, Billy Burt $50,000. b. Depreciation for tax purposes $112,700. C. $2,500 is allocable to the investments in stock. The remainder is related to Biscate business. d. $6,000 in fees were incurred in organizing Bizrate Includes $5,000 of premiums for term life insurance on Jon and Billy Bizcate is the beneficiary of these policies. In addition, $4,300 of the health insurance premiums are attributable to coverage for Jon and his family, and $3,900 are attributable to coverage for Billy and his family. f. Sold 500 shares of SBUX stock for $35,000 on December 1, 2018. The stock had been purchased by Jon on July 1, 2004 for $20,000 and was contributed by him on February 22, 2018, when it was worth $30,000. Also, on December 1, 2018 sold 100 shares of Grand View, Inc. for $2,000. The stock had been purchased on March 1, 2018 for $3,000. At no time did Bizcate own more than 1% of the outstanding stock of these corporations. Sold a delivery truck on September 23, 2018 for $35,000. The Truck had originally been purchased on May 1, 2018 for $33,400. Depreciation taken for book purposes was 57,000. Depreciation taken for tax purposes was 59,350 h. Biscate owns less than 20% of the outstanding stock of each of these corporations.

Bizrate Electronics, Inc. Balance Sheet December 31, 2018 Assets 113,000 300,000 29,000 Cash Accounts Receivable Less Allowance for Bad Debts Inventory Tax Exempt Securities Other Current Assets Other Investments Buildings and Depreciable Assets (net) Land Total Assets 271,000 1,700,000 17,000 40,000 85,000 165,400 70,000 2,461,400 Liabilities and Equity Accounts Payable Mortgages, Notes Payable in < 1 year Other Current Liabilities Mortgages, Notes Payable in > 1 year Capital Stock Retained Earnings Total Liabilities and Equity 375,000 185,000 70,000 1,190,000 500,000 141,400 2,461,400