Discussion:Corporate Dissolution - Ending Inventory
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Discussion Forum Index --> Advanced Tax Questions --> Corporate Dissolution - Ending Inventory
Discussion Forum Index --> Tax Questions --> Corporate Dissolution - Ending Inventory
| 15 February 2009 | |
| I'd like to hear from other preparers who may have had more experience with 1120S final returns. If a corporation is dissolved and its ending inventory is distributed to the shareholders, how do we reconcile Sched A (COGS) with Sched L. The latter must show zero for year-end inventory, but if the former also shows zero for year-end inventory, then the COGS will be overstated. Any suggestions? | |
| 15 February 2009 | |
| Schedule A line 7 - Ending Inventory = $0.00
Scdedule L line 3 - Inventories = $0.00 In order to get the ending inventory on the books to $0.00, Credit Inventory and Debit shareholder distributions, or whatever account you have set up in the accounting software, this will adjust (lower) the COGS. Good Luck TexCPA 22:25, 14 February 2009 (CST) | |
| 15 February 2009 | |
| The problem is not with the books - the problem is with the Sched A on Form 1120S, which doesn't have provisions for shareholder distributions. In other words, according to Sched A, COGS = beg. inventory + purchases - ending inventory. There doesn't seem to be any way to report the ending inventory as zero without either overstating the COGS or breaking the internal consistency of the return. Shareholder distributions reported on Sched K are independent of computations on Sched A and there doesn't seem to be any way to tie them together. | |
| 15 February 2009 | |
| Why do you think COGS would be overstated if ending inventory = $0.00? Not sure what you mean be 'internal consistency of the return'?
If you are not a tax professional, you may need to seek one, since your profile is not completed. Why are you trying to tie Schedule K to Schedule A? TexCPA 15:13, 15 February 2009 (CST) | |
| February 15, 2009 | |
| Why not subtract the current EI from purchases? You aren't overstating COGS, and then your inventory still exists on your book. | |
| 16 February 2009 | |
| LemRl,
If your suggestion is to subtract the ending inventory (before distribution to shareholders) from COGS in order to bring Line 7 on Sched A to zero, then the problem is that purchases will have to be a negative number. Here's an example: let's say your opening inventory is $10, your purchases are $20, and the ending inventory is zero because it all has been distributed to the shareholders upon dissolution. Now, Line 1 says $10, and Line 7 says $0. In order to make this work, Line 6 has to be ($10). Perhaps you were suggesting something else, in which case I'm sorry for having misunderstood you. | |
| 16 February 2009 | |
| In your example of BI of $10 plus purchases of $20 on line 5 of Sch A (Other Costs)I would enter a negative $30 with an attached statement indicating that it is a $30 distribution to shareholders upon dissolution. | |
| 16 February 2009 | |
| Scot, (and others)
Line 5 Other costs and negative number, that was one of my first inclinations, but why? Am I missing something that says schedule A has to 'reconcile' to Schedule K? | |
| 16 February 2009 | |
| I agree with TexCPA. Negative 'other costs' = distribution to shareholders, ending inventory = 0. Why don't you do the journal entries first so you can see what we're trying to tell you? | |
| 16 February 2009 | |
| Scot,
I like your suggestion. In the past I used to leave the ending inventory at its pre-distribution value and attached a statement to Line 16 on Sched K to the effect that distributions include EI; but I like your idea better. | |
