The document outlines the required federal corporation income tax return forms for Express Catering, Inc. for the 2012 tax year, detailing the company's structure, shareholders, and operational financial information. Express Catering, a New York-based C corporation specializing in mobile food catering, reported a net income loss of $57,500 for the year, and has made significant investments in advertising and equipment amid an expansion. The document also covers specific accounting details, including asset valuations, accrued wages, and compliance with tax reporting requirements.

1. Instructions:
Please complete the
required
federal corporation income tax return forms for Express
Catering, Inc. for the 2012 tax year based upon the facts
presented below. Also, if required information is missing, use
reasonable assumptions to fill in the gaps. Ignore any
Alternative Minimum Tax (AMT) calculations and do not
prepare any AMT related forms.
Express Catering, Inc. (EC) is organized in New York as a
corporation and is taxed as a “C” corporation with a calendar
year-end. EC operates a delicatessen/bakery in New York City,
NY that specializes in mobile food catering for events and
gatherings within the tri-state area. EC’s address, employer
identification number (EIN), and date of incorporation are as
follows:
Express Catering, Inc.
257 West 55
th
Avenue
New York City, NY 10027
EIN- 13-9823459
Date Incorporated- March 17, 2007
EC has been at the same address and has not changed its same
since inception.
EC has only common shares issued (no preferred stock). There
are currently 10,000 shares of EC common stock issued and
outstanding.
EC is owned by four shareholders from the same family:

2. Raphael Giordano (father) and his three children Silvia, Andrea,
and Marco. Their personal information is provided below:
Raphael Giordano
160 West 57
th
Avenue
New York City, NY 10027
SSN-356-87-4322
Shares owned 5,500
Silvia Giordano Costa
250 South Main
Hoboken, New Jersey 07030
SSN-284-58-4583
Shares owned 1,500
Andrea Giordano
65 East 55
th
Avenue
New York City, NY 10027
SSN-423-84-2343
Shares owned 1,500
Marco Giordano
160 West 57
th
Avenue
New York City, NY 10027
SSN-487-27-4797
Shares owned 1,500
EC uses the accrual method of accounting and follows GAAP.
EC is not a subsidiary nor is it in an affiliated group with any

3. other entity. EC is not audited by a CPA firm and has never had
a restatement of its income statement.
In addition, EC reported the following information for the
current year:
·
EC did not pay dividends in excess of its current and
accumulated earnings and profits.
·
None of the stock of EC is owned by non U.S. persons
·
EC has never issued publicly offered debt instruments.
·
EC is not required to file a Form UTP
·
EC made several payments in the current year that required the
filing of federal Form(s) 1099. These Forms 1099 were filed
timely by EC.
·
During the year, none of the shareholders of EC changed.
·
EC has never disposed of more than 65% (by value) of its assets
in a taxable, non-taxable, or tax-deferred transaction.
·
EC did not receive any assets in Section 351 transfers during
the year.
·

4. All of the questions on Schedule B, Form 1120 are no for the
year.
Additional information:
EC has been expanding rapidly its catering business. This
expansion has required a significant amount of new equipment
purchases. EC sold some of its liquid investments in order to
avoid having to take on debt to fund these purchases. Further,
EC invested heavily in its catering business by significantly
increasing its advertising budget. EC and its officers expect
that revenue increases from these expenditures will begin next
year.
Despite being profitable the past few years, EC does not want to
carryback any net operating loss (if any) generated in the
current year. EC believes the next few years will be far more
profitable and the losses will be of a greater benefit in the
future.
The dividends received by EC during the year were paid by
Apple, Inc.
EC had its sole municipal bond (New York City) redeemed
(bought back) in the current year. EC originally purchased the
New York City bonds on February 1, 2009 for $100,000 (no
premium or discount paid). The bond was redeemed by New
York City on February 1, of the current year for $100,000. EC
received a Form 1099-B to reflect the transaction. Box A of the
1099- B was checked.
EC purchased 200 shares of Apple, Inc. on October 10, 2009 for
$100,000 (including commission). On July 10, of the current
year, EC sold the 200 shares of Apple, Inc. for $350 a share
(including commission). EC received a 1099-B reporting the
sale proceeds. Box A was checked on the 1099-B.
During the year EC contributed $8,000 to the American Lung
Association.
On December 10, of the current year, EC paid Madison

5. Advertising $27,500 to design a new catering advertisement
campaign for next year. This money represented half of the
total $55,000 contract price. EC expects that the services will
be provided and delivered to EC on about June 30, of next year.
EC prepaid its insurance premium of $21,000 in October. The
new policy is effective November 1, of this year through
October 31, of next year. EC’s regular tax depreciation for the
year is correctly calculated as $350,000
before considering the current year fixed asset additions of
$840,000.
EC
wants to claim the fastest recovery method(s) possible on these
asset additions without electing any §179 expensing.
Total current year asset additions are as follows (all the
equipment purchased was new):
Description
Date Purchased
Amount
5 Year MACRS Property
October 2, 2012
$480,000
7 year MACRS Property
September 10, 2012
$320,000
Delivery Truck (over 6,000 lbs)-5 Year MACRS Property
October 12, 2012
$40,000
EC officer information for the current year is as follows
(compensation amounts included in total wages on the income
statement for all employees):

6. Name
Social Security number
Percent of time devoted to business
Percent of stock owned
Amount of compensation
Raphael Giordano
356-87-4322
100%
55%
150,000
Silvia Costa
284-58-4583
100%
15%
130,000
Andrea Giordano
423-84-2343
100%
15%
130,000
Marco Giordano
487-27-4797
100%
15%
120,000
As reported on the balance sheet (see below), on December 31
of last year, the accrued wages were $44,500 and the accrued
bonuses were $45,000. The wages and bonuses were payable to
Raphael, Silvia, Andrea, and Marco. These accrued wages and
bonuses were paid on January 20, of this year. Also as reported
on the balance sheet, on December 31 of this year, the accrued
wages were $51,500. The wages were owed to Raphael, Silvia,

7. Andrea, and Marco. The accrued wages were paid on January
22, of next year.
All of the other employees’ wages and bonuses were paid on
December 31.
As of December 31, last year and December 31 of this year,
respectively, EC had accrued vacation payable on its books of
$62,500 and $73,000. All of the prior year vacation accrual was
paid during the period from April 1 through November 30 of the
current year. As of March 15 of next year, EC had paid none of
its current year accrual. All of the vacation accrual amounts for
both years were
owed to employees
other than
Raphael, Silvia, Andrea and Marco. None of the officers had
accrued vacation at December 31 of either year-end.
On November 1, a large insurance company paid EC a $100,000
deposit to reserve catering event services on March 18 of next
year at the insurance company’s annual meeting in New York
City. The money is fully refundable up until January 15 of next
year. Thereafter, half of the deposit becomes non-refundable.
EC maintains an inventory of several items. Inventory is valued
at cost. EC has never has never changed it inventory method.
EC uses specific identification for its inventory. EC has never
written down any subnormal goods. The rules of Section 263A
(UNICAP) do not apply to EC.
EC did not pay a dividend in the current year.
EC made no estimated tax payments during the current year.
Financial Statements (kept on a GAAP basis):
Express Catering, Inc.
Balance Sheet
Assets:

8. 1/01/CY 12/31/CY
Cash
$ 62,500 $ 44,000
Accounts Receivable
145,000 177,000
Less: Allowance for Bad Debts
(32,000) (41,000)
Inventory
59,000 96,000
Publicly traded securities
100,000 0
Tax-exempt bond
100,000 0
U.S. Treasury Bonds
125,000 125,000
Fixed Assets
2,115,000 2,955,000
Less: Acc. Depreciation
(436,500) (715,000)
Prepaid Insurance
0 17,500
Prepaid Rent
38,500 39,500
Prepaid Advertising
0 27,500
Total Assets:
$2,276,500 $2,725,500
Liabilities and Capital:
Accounts Payable
102,000 131,000
Accrued Wages

9. 44,500 51,500
Accrued Bonuses
45,000 0
Accrued Vacation
62,500 73,000
Event Deposits
0 100,000
Note Payable-First Bank of NY (Credit Line)
424,000 657,000
Note Payable-EG Capital Equipment Leasing
1,243,000 1,415,000
Capital Stock
1,000 1,000
Additional paid-in Capital
99,000 99,000
Retained Earnings-Unappropriated
255,500 198,000
Total Liabilities and Capital:
$2,276,500 $2,725,500
Income Statement for the period ending December 31, CY
Item
Amount
Income:
Gross Sales
$
2,925,000
Less:
Returns

10. (8,500)
Net
Sales
2,916,500
Cost of Goods
Sold
(1,129,850)
Dividend Income
2,800
Interest Income -Bank
150
Interest Income-U.S. Treasury
3,000
Municipal Bond Interest
Income 1,400
Capital Loss-Apple,
Inc.
(30,000)
Total
Income:
1,764,000
Expenses:
Employee
Salaries
743,500
Repairs and
Maintenance
19,000
Bad
Debts

11. 44,000
Rent
230,000
Payroll
Taxes
60,000
Licensing
Fees
4,500
Property
Taxes
12,500
Interest
Expense
140,000
Depreciation
278,500
Office
Supplies
5,400
Employee
Training
3,600
Employee
Benefits
24,000
Charitable
Contribution
8,000
Advertising
70,000
Meals and Entertainment
3,400
Travel
600

12. Insurance
18,000
Utilities
142,000
Telephone
14,500
Total
Expenses:
$ 1,821,500
Federal income tax expense
0
Net
Income:
($57,500)