Please I want this to be done asap. It’s due tomorrow XXXXXXXXXXat 8:30. See below...

Question

Please I want this to be done asap. It’s due tomorrow XXXXXXXXXXat 8:30. See below instructions Overview You are a senior tax accountant in the firm, Ernest & Rainhouse. Joe, a new junior accountant,...

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Please I want this to be done asap. It’s due tomorrow XXXXXXXXXXat 8:30. See below instructions

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 rejectedZeus, Inc.'s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF]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: XXXXXXXXXX.

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 XXXXXXXXXXThe 1099s were filed timely.

Zeus, Inc.'s 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 its inception until this year, Zip Coaster has been Zeus' 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 giveaway of $100,000.

Zeus, Inc. rents part of its unused land. Zeus, Inc. received a check for $50,000 on December 27, 2020, for a 6-month 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 Payments**
Date	Federal Estimated Tax Payment	California Estimated Tax Payment
4/15/2020	$72,500	$15,000
6/15/2020	$72,500	$15,000
9/15/2020	$72,500	$15,000
12/15/2020	$72,500	$15,000

On December 1, 2020, Zeus Inc. paid $400,000 in 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 to obtain the tax-exempt securities.

Zeus's regular tax depreciation for the year is correctly calculated as $1,112,499 (from the previous year's purchases) before considering the 2020 addition of 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 Information**
Name	Social Security #	% of Time Devoted to Business	% of Stock Owned	Amount of Compensation
Margo Harrington	XXXXXXXXXX	100%	.05%	$235,000
Dean Williams	XXXXXXXXXX	100%	.03%	$195,000
Dennis Johns	XXXXXXXXXX	100%	0%	$165,000
Jamie Conway	XXXXXXXXXX	100%	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 giveaway 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 Sheet**
Zeus, Inc. Balance Sheet	As of Dec. 31, 2019	As of Dec. 31, 2020
Assets:
Cash	165,000	119,000
Accounts Receivable	128,000	75,000
Less: Allowance for Doubtful Accounts	(43,000)	(49,000)
Inventory	422,000	390,000
Tax-exempt Securities	150,000	150,000
Publicly Traded Stocks	200,000	200,000
Fixed Assets	24,000,000	28,000,000
Less: Accumulated Depreciation	(13,542,000)	(12,892,000)
Prepaid Insurance		25,000
Prepaid Rent	30,000	35,000
Prepaid Contractors		17,500
Other Assets	150,000	250,000
Total Assets	11,660,000	16,320,500

Liabilities & Stockholders' Equity:
Accounts Payable	48,000	62,000
Accrued Wages	123,000	118,000
Accrued Bonuses	68,500	39,000
Accrued Vacation	29,000	35,000
Legal Settlement Accrual	-	190,000
Prize Accrual	-	100,000
Unearned Rental Revenue	-	50,000
Notes Payable - Short Term	1,540,000	1,084,000
Notes Payable - Long Term	7,112,000	11,728,000

Capital Stock	100,000	100,000
Additional Paid-in Capital	2,000,000	2,000,000
Retained Earnings	639,500	814,500
Total Liabilities & Stockholders' Equity	11,660,000	16,320,500

**Income Statement**
Zeus, Inc. Income Statement
For the Year Ended December 31, 2020

Income:
Sales			26,523,275
Less: Sales Returns & Allowances			(113,500)
	Net Sales		26,409,775
Cost of Goods Sold			(2,052,500)
Gross Margin			24,357,275
Other Income:
	Dividend Income	14,300
	Interest Income	2,650
	Municipal Bond Interest Income	2,300	19,250
Total Income:			24,376,525

Expenses:
Employee Salaries			13,905,600
Repairs & Maintenance			492,350
Bad Debts			58,000
Rent			1,543,000
Payroll Taxes			1,112,400
Licensing Fees			10,750
Property Taxes			277,000
Interest Expense			781,000
Depreciation			1,350,000
Office Supplies			33,950
Employee Training			53,750
Safety Expenses			31,000
Political Contribution			2,500
CA Safety Commission Fine			5,000
Advertising			290,500
Admission Supplies			143,250
Attorney Fees			10,000
Meals & Entertainment			8,500
Travel			13,550
Insurance			215,000
Legal Settlement			190,000
Prize Contest Expense			100,000
Fuel			158,675
Utilities			2,530,500
Telephone			135,250
	Total Expenses Before Taxes		23,451,525

	CA Income Tax Expense	60,000
	Federal Tax Expense	290,000
	Total Income Taxes		350,000
Net Income:			575,000

Instructions

Write a 3-5 page paper in which you do the following:

Identify at least three errors or omissions onZeus Inc.'s Form 1120: U.S. Corporation Income Tax Return 2020 [PDF], justifying selections with IRS codes, IRS regulations, court cases, or FASB statements.

Explain the criteria that require 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 between a corporation's tax year and its 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.

Answered 1 days After Feb 05, 2024

Solution

Sandeep answered on Feb 06 2024

12 Votes

Ans 1.
Zeus, Inc.'s Form 1120 contains three significant e
ors or omissions. In accordance with IRS regulation 1.441-2(e)(2), Zeus Inc. failed to include. Firstly, the income statement does not adhere to the IRS format, as expenses and net income are presented on the same side. Secondly, there appears to be an overstatement of net income due to e
oneous computation of credits and deductions. Lastly, there is an understatement of tax liability from the prior year owing to failure to accurately declare exemptions.
Tax professionals authorized to represent taxpayers before the IRS are regulated by Treasury Circular 230, which outlines the Regulations Governing Practice Before the Internal Revenue Service (31 CFR:10). Section 10-21 of this circular mandates that practitioners who become aware that their clients have not complied with federal tax laws or have made omissions on affidavits, filings, or other documents executed under federal tax laws must promptly advise their clients about the omission, noncompliance, e
or, or consider disengagement, including:
· To co
ect a tax return when filing on paper, taxpayers should use Form 1040X, the Amended U.S. Corporate Income Tax Return. It's important to note that amended returns cannot be filed electronically. Form 1040X can be obtained from IRS.gov/forms.
· To rectify e
ors or make changes to a tax return, taxpayers must file an amendment. This is necessary in situations such as co
ecting filing status, income, credits, or deductions.
· No need to amend for mathematical e
ors or missing forms. Taxpayers are not required to file an amended return for co
ecting mathematical mistakes on their original return, as the IRS automatically co
ects such e
ors. Similarly, if a taxpayer forgets to attach forms like Form W-2 or a schedule, they don't need to file a co
ected return. The IRS will send a request to the taxpayer if necessary (IRS, 2021).
Ans 2.
Form 1065:
Boynton and Mills (2014) state that, all enterprises that file Form 1065 are required to file Schedule M-3 in the event of meeting the following criteria:
The total amount of aggregate assets at end of tax year as reported in Schd L of Line 14, col. (d), equals $10mn or more.
Amount of adjusted aggregate assets for tax year is $10mn or...

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