Completing Form 1120S INSTRUCTIONS Please use the information below to c

Completing Form 1120S

INSTRUCTIONS

Please use the information below to complete Form 1120S and the Schedule K-1%u2019s for Form 1120S. Blank forms can be found on the Hands-On Assignment page or
in Doc Sharing. If you have a tax software package please feel free to use it but be aware that I will not be able to answer specific questions about the
software package.

GENERAL COMPANY INFORMATION

Margaret Brown and Joel Lee each own 50% of Designs Inc. with no other class of stock authorized. On June 6 2009 they formed to provide design services.
Their business activity code is 541400.

Designs Inc.%u2019s business address is 2134 Merry Lane Las Cruces NM 08801. The telephone number is (575) 541-1122 and the e-mail address is
designsinc@cdi.com.

The employer identification number is 11-1111111. Margaret is the president of the company and Joel is the vice president. Margaret and Joel are the only
full-time designers employed by Designs Inc. and they perform all of the design services of the corporation. Margaret%u2019s Social Security number is
123-45-6789 and Joel%u2019s Social Security number is 555-48-9898.

Designs Inc. is an accrual method calendar-year taxpayer. Designs Inc. uses the straight-line method of depreciation for both book and tax purposes. (You are
not provided enough detailed data to complete a Form 4562 (depreciation). Enter the amount of depreciation on line 20 of Form 1120.) The corporation does not
maintain any inventory.

During the year the corporation distributed cash dividends of $15192.

Designs Inc. Income Statement

Income

Design fees $739000

Interest income (certificates of deposit) 2700

Total income $741700

Expenses

Salaries%u2014officers

Margaret Brown $190000

Joel Lee 190000 $380000

Salaries%u2014clerical 61000

Taxes

Property 26810

Payroll 23280

State income 3140

Other miscellaneous 2390 55620

Repairs and maintenance 16340

Meals and entertainment 9800

Travel 5600

Charitable contributions 1200

Interest expense on business loans 31100

Advertising 17650

Rental expense 9270

Depreciation 35910

Contributions to pension plans 31000

Employee benefit programs 21170

Accounting service 13790

Dues and subscriptions 5100

Insurance 17750

Legal and professional services 11000

Miscellaneous 4360

Telephone 3160

Total expenses (730820)

Net income before taxes $ 10880

Federal income tax (5192)

Net income per books $ 5688

Designs Inc. Balance Sheet

Assets January 1 2011 December 31 2011

Cash $ 35610 $ 42580

Accounts receivable 45100 43300

Certificates of deposit 134000 143000

Depreciable assets 210922 221488

Accumulated depreciation (47520) (83430)

Land 42000 42000

Other assets 3638 2490

Total assets $ 423750 $ 411428

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Liabilities and Equity January 1 2011 December 31 2011

Accounts payable $ 26550 $ 27497

Other current liabilities 15110 17853

Mortgages 126000 114300

Capital stock 200000 200000

Retained earnings 56090 51778

Total liabilities and equity $ 423750 $ 411428

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