hapter 7 Standard Cost System All interaction on Studypool is 10

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hapter 7 Standard Cost System
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Tax Accounting
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Question Description
Davy Jones provides the following information for Davy Jones’ Nautical Tours, Inc, a C corporation which he operates with his business partner, William Turner.

You’re required to prepare a Form 1120 U.S. Corporation Income Tax Return, an 1120 Statement 1 – Other Deductions, and an 1120 Schedule G – Information on Certain Persons Owning Stock

Davy Jones’ Nautical Tours, Inc, is operated by David K. Jones (SSN 000-00-0000) and William W. Turner (SSN 111-11-1111). They are each 50% common shareholders in the business.

Principal Business or Professional Activity Code; 114110
Principal business; Charter fishing tours
Employer Identification Number 867530950

Business address
1008 North Harbor Drive
San Diego, CA 92103

Home address (David K. Jones)
8700 Lake Murray Blvd #2
San Diego, 92119

The cash accounting method and GAAP are utilized
The business was incorporated on January 1st, 2012
Wages consist of $25,000 paid to one employee and $15,000 to another
Officer’s Compensation; $42,000 payments to each officer, Jones and Turner.
None of this compensation is claimed on Form 1125-A (Cost of Goods Sold).
There is no preferred stock
Depreciation expense; The Jolly Roger was purchased for $850,000. The depreciation on the income statement is book depreciation and will differ from what is actually used on Line 20 Depreciation of form 1120. The boat is depreciated using the Modified Accelerated Cost Recovery System (MACRS), half year convention, is in its 4th year of service and the 10-year recovery period is used. Utilize Publication 946 How to Depreciate Property to calculate the correct depreciation amount to enter on the 1120 Line 20 (Form 4562 is not required). Locate Table A1 in the Appendix to calculate the tax-deductible depreciation.
Interest expense is interest paid on the loan for the boat; the boat loan is considered nonrecourse
Insurance payments were made to cover liability for guests and for the boat
Payroll taxes; FICA and FUTA payments made on behalf of employees and corporate officers
Travel was purely for business purposes
Parking fines are tickets Jones received for parking illegally
Lease expense was paid to Honda Motors for his mother’s car lease, who is not involved in the business in any way
Estimated payments; The Corporation made four quarterly estimated tax payments of $1,000

They’d like any overpayment refunded to them.

Davy Jones’ Nautical Tours, Inc. 2016 Income Statement

Revenue

$400,950.00

Wages

($40,000.00)

Officer’s Compensation

($84,000.00)

FICA

($9,486.00)

FUTA

($169.00)

Depreciation

($85,000.00)

Interest

($43,900.00)

Advertising

($6,350.00)

Supplies

($23,795.00)

Legal fees

($6,940.00)

Insurance

($26,700.00)

Boat slip rental

($33,010.00)

Travel

($6,250.00)

Office expense

($7,940.00)

Parking fines

($1,350.00)

Lease expense

($3,650.00)

Net Profit

$22,410.00

Davy Jones’ Nautical Tour, Inc 2016 Balance Sheet

1/1/2016

12/31/2016

Cash

$15,500.00

$15,500.00

Boat

$850,000.00

$850,000.00

Accumulated Depreciation

($255,000.00)

($340,000.00)

Total Assets

$610,500.00

$525,500.00

Loans

$525,000.00

$417,590.00

Equity Investment

$50,000.00

$50,000.00

Retained Earnings

$35,500.00

$57,910.00

Total Equity + Liability

$610,500.00

$525,500.00

Question Description
Using Chapter 7 of your text as a reference, define a standard cost and explain what constitutes the components of a standard cost. Describe the advantages and disadvantages of a standard cost system and explain under what circumstances a standard cost system is most effective. Your initial post should be 200-250 word and apa format

Tags: business managerial