Form 1120 (Part 1), Form 1125A

 

Hi Readers,

 

We have earlier Discussed What is Form 1120, Who Files It, When it is filed, Now Let’s see Insights of it.

In case you have missed it, you can through the link mentioned below:

https://www.taxacc20.com/2021/11/form-1120-and-form-1120s.html

 

 

Point 1 (a) Gross Receipts or Sales: Gross Receipt or Sale from all Business Operations must be reported except for amount that must be reported on line 4 to 10.

 

Point 2 : Cost of Goods Sold: The following amount shall be reported: (Form 1125-A)

(a)   Inventory At Beginning of Year: It Includes the amount for the inventory of all finished or partly finished goods, raw materials and/or supplies which were acquired for sale or were physically part of the merchandise intended for sale at the beginning of the tax year.

(b)    Purchases – It includes amount of all purchases for raw materials and merchandise for re-sale that were made by the business during the tax year. This amount should not include any amount for purchases or products that were consumed by any owner of the business for personal consumption.

(c) Cost of Labour - Typically, labour costs are only an element of cost of goods sold in a manufacturing or mining business. These direct labour costs are the wages that are paid to employees who spend their time working directly on the product being manufactured (or mined) for sale.

(d)  Additional Section 263A Costs- Such costs involve certain purchasing costs indirectly associated with the production or procurement of the items being sold by the business. Examples of such items would be warehousing fees, processing fees, repacking and assembly costs. This provision does not apply to taxpayers whose three year average annual gross receipts ending with the preceding tax year are less than $10,000,000.

(e)  Other Costs - In this section, other costs directly associated with the manufacturing or mining process are entered.

(f)    Inventory at End of Year - This is the inventory amount of all finished or partly finished goods, raw materials and/or supplies which were acquired for sale or were physically part of the merchandise intended for sale at the end of the tax year.

 

Method Used For Valuing Ending Inventory: There are three options: Cost, Lower of Cost or Market, and Other

If there is any change in determining Quantities, Cost or valuation : Choose YES or NO

 

Gross Profit will be Calculated in Line 3

 

Will discuss about remaining points in upcoming blogs

 

Compiled By:

CA. Harsimran Kaur