PROPRIETARY MATERIALS

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2 PROPRIETARY MATERIALS No use of these proprietary materials is permitted without the express written consent of or license from Thomson Reuters. Altering, copying, distributing or reproducing any of these proprietary materials in any manner is expressly prohibited. DISCLAIMERS The scenarios, examples, and content within this document are used strictly for instructional purposes only. Thomson Reuters shall not be responsible for any liability directly or indirectly resulting from any outcomes or conclusions drawn from individual research discussed during the class. In response to IRS Circular 230 requirements, Thomson Reuters advises that any discussions of federal tax issues in its publications and products or in third-party publications and products on its platforms are not intended to be used and may not be used to avoid any penalties under the Internal Revenue Code, or to promote, market, or recommend any transaction or subject addressed therein. SOFTWARE LICENSE AGREEMENT The right to use the software product described in this workbook is specifically conditioned upon your execution of and compliance with a Tax Software and Services Agreement with Thomson Reuters. All contents are copyright 2017, Thomson Reuters. All rights reserved

3 TABLE OF CONTENTS Table of Contents Table of Contents 3 Checkpoint Tools for PPC Help System 14 Submit Product Comments and Suggestions 15 To submit an enhancement or new product idea for Checkpoint Tools: 15 Technical Support Service Center 16 Product License Agreement 17 PPC Cookies Policy Statement 18 Accessing Checkpoint Tools Templates 19 Creating New Checkpoint Tools Documents 22 Using the Tickmarks Toolbar 23 Entering Data 24 Printing 25 Saving 26 Viewing 27 Product Expiration 28 Links to Content 29 Latest Version Report 30 Using Checkpoint Tools with CSI's Virtual Office 31 Which Checkpoint Tools Products are Displayed in Virtual Office? 32 Using Checkpoint Tools Reference Links in Virtual Office 33 Choosing between Core Package and Specified Risk 34 Opening a New Practice Aid 35 Share Data 37 Review Audit Program Changes 38 Delete Practical Considerations 39 Tickmarks 40 Unsigned Audit Program Step Visual Cue 41 Show Practical Considerations 42 Adding PPC Comments to an Audit Program

4 TABLE OF CONTENTS Searching the Checkpoint Tools Tree 45 Print Practical Considerations 46 Configure Sign-off 47 Step Sign-offs 48 Checkmarks 49 Clear All Sign-offs/Checkmarks 50 Workpaper References 51 Edit Practice Aids 52 Finalize for Printing 53 Recalculate Totals 54 Inserting and Deleting Rows Included in a Formula 55 Show/Hide Math Tables 56 Using PPC's Practice Aids with CSI's Engagement Solution 57 Sharing Documents with Clients 58 Accessing PPC Templates through Microsoft Word or Excel's File/New Menu 59 Using PPC's Practice Aids with ProSystem fx Engagement 60 Using PPC's Practice Aids with CaseWare 67 Managing PPC's Practice Aids without Paperless Engagement Software 68 Using Checkpoint Tools with CSI's Virtual Office 69 Assign a New Shortcut Key for Step Sign-offs 70 Using the PPC's Engagement Letter Generator 73 Using the PPC Letter Customizer 73 Clearing Content from a Letter 74 Frequently Asked Questions 75 Welcome to PPC's 1120 Workpapers 76 Special Note for Printing 76 Accrual to Cash Conversion 77 Entering Information 77 Enter the following information: 77 Completed Contract Method

5 TABLE OF CONTENTS Entering Information 78 Enter the following information: 78 Computing 481(a) Adjustments 79 Entering Information 79 Enter the following information as of the close of the tax year preceding the year of the change: 79 Tracking 481(a) Adjustments 80 Entering Information 80 Enter the following information: 80 Capital Loss Carryforward 81 Entering Information 81 Enter the following information: 81 Net Operating Loss Carryforward 82 Entering Information 82 Enter the following information: 82 Passive Activity Loss Carryforward 83 Entering Information 83 Enter the following information for each tax year: 83 Three-Year Comparison of Book/Tax Differences (M-1/M-3) 84 Entering Information 84 Enter the following information for each tax year: 84 Accruals - Tax Basis 87 Entering Information 87 Enter the following information for each type of expense listed: 87 The following expenses are listed: 87 Inventory Reserves and Real Property Taxes 88 Bad Debt Expense 89 Entering Information 89 Income Tax or Cash Basis Books 89 Enter the following: 89 GAAP/Accrual-based Books

6 TABLE OF CONTENTS Enter the following: 89 Lease Inclusion 90 Entering Information 90 Enter the following information: 90 Lease Year Definitions 90 Meals and Entertainment 91 Entering Information 91 Enter the following information: 91 Meals and Entertainment Subject to Disallowance: 91 Section 179 Expense Carryforward 93 Entering Information 93 Enter the following information: 93 Input Table 93 Depreciation and Sale of Assets 94 Entering Information 94 Organizational Expenses 95 Entering Information 95 Enter the following information: 95 Start up Costs 96 Entering Information 96 Enter the following information: 96 Installment Sale Deferred Gain 97 Entering Information 97 Enter the following information: 97 Schedules Beginning after the First Year 97 Like-kind Exchanges 98 Entering Information 98 Enter the following information: 98 Analysis of Inventory Reserves 99 Entering Information

7 TABLE OF CONTENTS Enter the following information: 99 UNICAP Summary 100 Entering Information 100 Loan Information 101 Entering Information 101 Enter any three of the following amounts: 101 Prepaid Assets Reconciliation 102 Entering Information 102 Enter the following information: 102 Earnings and Profits (E&P) 103 Entering Information 103 Enter the following information: 103 Retained Earnings Rollforward 104 Entering Information 104 Enter the following information: 104 Accumulated Earnings Tax Computation 105 Entering Information 105 Enter the following information: 105 Current and Deferred Income Taxes 107 Entering Data 107 Completing the Calculations 109 Calculating State Income Taxes 109 Welcome to PPC's 1120S Workpapers 110 Special Note for Printing 110 Accrual to Cash Conversion 111 Entering Information 111 Enter the following information: 111 Completed Contract Method 112 Entering Information 112 Enter the following information:

8 TABLE OF CONTENTS Computing 481(a) Adjustments 113 Entering Information 113 Enter the following information as of the close of the tax year preceding the year of the change: 113 Tracking 481(a) Adjustments 114 Entering Information 114 Enter the following information: 114 Accruals - Tax Basis 115 Entering Information 115 Enter the following information for each type of expense listed: 115 The following expenses are listed: 115 Inventory Reserves and Real Property Taxes 116 Bad Debt Expense 117 Entering Information 117 Income Tax or Cash Basis Books 117 Enter the following: 117 GAAP/Accrual-based Books 117 Enter the following: 117 Lease Inclusion 118 Entering Information 118 Enter the following information: 118 Lease Year Definitions 118 Meals and Entertainment 119 Entering Information 119 Enter the following information: 119 Meals and Entertainment Subject to Disallowance: 119 Officers Compensation 121 Entering Information 121 Enter the following information for each officer for the current tax year: 121 Section 179 Expense Carryforward 122 Entering Information

9 TABLE OF CONTENTS Enter the following information: 122 Input Table 122 Depreciation and Sale of Assets 123 Entering Information 123 Organizational Expenses 124 Entering Information 124 Enter the following information: 124 Start up Costs 125 Entering Information 125 Enter the following information: 125 Computing the Tax on Built-in Gains 126 Entering Information 126 Enter the following information: 126 Installment Sale Deferred Gain 128 Entering Information 128 Enter the following information: 128 Schedules Beginning after the First Year 128 Like-kind Exchanges 129 Entering Information 129 Enter the following information: 129 Analysis of Inventory Reserves 130 Entering Information 130 Enter the following information: 130 UNICAP Summary 131 Entering Information 131 Loan Information 132 Entering Information 132 Enter any three of the following amounts: 132 Prepaid Assets Reconciliation 133 Entering Information

10 TABLE OF CONTENTS Enter the following information: 133 Calculation of Basis in Stock and Debt 134 Entering Information 134 Enter the following information: 134 Calculations of Stock Basis, AAA, OAA, PTI, Retained Earnings, and AE&P 135 Entering Information 135 Enter the following information in the white input cells, as applicable, for each category, (i.e.) Stock Basis, AAA, OAA, PTI, RE, and AE&P): 135 Income and Gain Items: 135 Loss, Deduction, and Other Negative Items: 136 Other Timing Differences: 137 Computation of Section 444 Required Payments 139 Entering Information 139 Enter the following information: 139 Computing the Tax for Short-period C Return 140 Entering Information 140 Enter the following information: 140 Computing the Tax on Excess Net Passive Income 141 Entering Information 141 Enter the following information: 141 Welcome to PPC's 1065 Workpapers 142 Special Note for Printing 142 Accrual to Cash Conversion 143 Entering Information 143 Enter the following information: 143 Completed Contract Method 144 Entering Information 144 Enter the following information: 144 Computing 481(a) Adjustments 145 Entering Information

11 TABLE OF CONTENTS Enter the following information as of the close of the tax year preceding the year of the change: 145 Tracking 481(a) Adjustments 146 Entering Information 146 Enter the following information: 146 Carryforward Schedule for Determining Partner s Amount at Risk 147 Entering Information 147 Enter the following information: 147 Accruals - Tax Basis 149 Entering Information 149 Enter the following information for each type of expense listed: 149 The following expenses are listed: 149 Inventory Reserves and Real Property Taxes 150 Bad Debt Expense 151 Entering Information 151 Income Tax or Cash Basis Books 151 Enter the following: 151 GAAP/Accrual-based Books 151 Enter the following: 151 Lease Inclusion 152 Entering Information 152 Enter the following information: 152 Lease Year Definitions 152 Meals and Entertainment 153 Entering Information 153 Enter the following information: 153 Meals and Entertainment Subject to Disallowance: 153 Section 179 Expense Carryforward 155 Entering Information 155 Enter the following information: 155 Input Table

12 TABLE OF CONTENTS Depreciation and Sale of Assets 156 Entering Information 156 Organizational Expenses 157 Entering Information 157 Enter the following information: 157 Start up Costs 158 Entering Information 158 Enter the following information: 158 Installment Sale Deferred Gain 159 Entering Information 159 Enter the following information: 159 Schedules Beginning after the First Year 159 Like-kind Exchanges 160 Entering Information 160 Enter the following information: 160 Analysis of Inventory Reserves 161 Entering Information 161 Enter the following information: 161 UNICAP Summary 162 Entering Information 162 Loan Information 163 Entering Information 163 Enter any three of the following amounts: 163 Prepaid Assets Reconciliation 164 Entering Information 164 Enter the following information: 164 Allocating Basis Adjustment from 754 Election on Transfer of Partnership Interest 165 Entering Information 165 Enter the following information: 165 Allocating Nonrecourse Debt

13 TABLE OF CONTENTS Computing 1st Tier Minimum Gain 166 Computing 2nd Tier Minimum Gain 166 Computing 3rd Tier Minimum Gain 166 Entering Information 167 Enter the following information: 167 For each partner, enter the following information: 167 Computing Gain on Contribution of Encumbered Property 168 Entering Information 168 Enter the following information: 168 Computing Partner s Basis in Property Received in Partnership Distribution 169 Entering Information 169 Enter the following information: 169 Determining Continuing Entity in Partnership Merger or Division 170 Entering Information 170 Enter the following information: 170 Partner s Outside Basis Calculation 171 Entering Information 171 Enter the following information: 171 Distributions to Contributors of Appreciated Property 173 Entering Information 173 Enter the following information: 173 Computation of Section 444 Required Payments 174 Entering Information 174 Enter the following information: 174 About the Disclosure Checklists 175 Completing the Disclosure Checklists 176 Modifying the Checklists for New Pronouncements 177 Searching Disclosure Examples by Keyword 178 Viewing and Hiding Disclosure Requirements 179 Viewing Disclosure Examples

14 CHECKPOINT TOOLS FOR PPC HELP SYSTEM Checkpoint Tools for PPC Help System You can access the complete on-screen help system for Checkpoint Tools for PPC by clicking the Help icon at the top right of the screen. Then select Checkpoint Tools Help. From a Word or Excel document, click the PPC tab and then Checkpoint Tools Help. From the help contents, you can access information about the functions of the program, as well as step-bystep instructions for performing those functions. Use the Index tab to search for a topic or concept and go directly to that topic. You can also use the Search tab to perform a full-text search of the help system. Whenever you do not find a topic quickly using the Index, the Search option is often a viable alternative. You can access the complete on-screen help system for Checkpoint Tools for PPC by clicking the PPC tab, and then select Checkpoint Tools Help

15 SUBMIT PRODUCT COMMENTS AND SUGGESTIONS Submit Product Comments and Suggestions The authors encourage users of Checkpoint Tools to contact Thomson Reuters to submit new product ideas and offer any comments or suggestions that they may have to improve the usefulness of future releases. To submit an enhancement or new product idea for Checkpoint Tools: 1. Go to the Customer Help Center Home page. 2. Click Sign In 3. Fill in your username and password and click Login. Note: If you don't have a username, click the New User? link to register. 4. Click the Ideas tab. 5. Click Post Idea. 6. Complete the idea form with the required details including a description of your idea, select the Checkpoint Tools product, and select the type of idea. 7. Click Post. Note: Your new idea can be voted on by clicking the Promote button. You can also write and review comments written about the idea. Have your coworkers vote on your idea!

16 TECHNICAL SUPPORT SERVICE CENTER Technical Support Service Center PPC maintains a staff of trained professionals to provide customers with solutions to technical issues and information about PPC's electronic products. Technical Support Telephone: (800) Customer Help Center: Information Needed Please be at your computer when you call and be prepared to give the following information (when applicable): Application Information The version number of the product you are using (available on the Help menu by clicking "About") The exact wording of any messages that appeared on your screen What happened and what you were doing when the problem occurred How you tried to solve the problem System Information Windows Operating System and Office versions Network Operating System The type of hardware you are using, including network hardware

17 PRODUCT LICENSE AGREEMENT Product License Agreement The Product License agreement can be found here

18 PPC COOKIES POLICY STATEMENT PPC Cookies Policy Statement For those worried about privacy or security issues, our use of cookies does not compromise privacy. Such data is usually stored on your computer's hard drive as a file or folder called "cookies" and can be deleted if you so choose. In addition, cookies created by one site will work with that specific site only. In addition to the website, our Checklist Tools Web-based installations require that cookies be enabled so that we can efficiently validate your account information and display your licensed products

19 ACCESSING CHECKPOINT TOOLS TEMPLATES Accessing Checkpoint Tools Templates From the Start menu, select Checkpoint Tools for PPC. If it is not listed on the Start menu, click All Programs PPC Checkpoint Tools for PPC. You can also start the product from the Checkpoint Tools for PPC icon on your desktop. The menu of the Checkpoint Tools Home tab has the following options: File Options - Word - Excel - Open Document(s) - Exit View Options - My Current Releases Only - My Current and Prior Releases - All Checkpoint Tools Offerings - Expand - Collapse Note:If you click on My Current Releases Only you are able to toggle between My Current and Prior Releases and My Current Releases Only even though the main display contains information that pertains to My Current and Prior Releases Note: To Expand or Collapse,highlight the desired section of text before selecting the command. Tools Options - Options: o o o o o Online Settings: Refresh License File or set/update yourcheckpoint Credentials. Content Settings: Set Location (for preferred location of reference material) View Settings: View current tools or view all tools Program Settings: Show PPC menu in Excel or Word for non-ppc documents; Display splash screen when program starts Document Settings: Practical Considerations color in documents

20 ACCESSING CHECKPOINT TOOLS TEMPLATES o - Latest Version Report - PPC Template Report - Search Checkpoint Tools Tree - Search Disclosure Library Help Options - Checkpoint Tools Help - Quick-Tour - Documentation - Support on the Web - Frequently Asked Questions - About Checkpoint Tools Side bar - Eng. (Engagement) Letter Generator - Disclosure Libraries - Practice Aids Products

21 ACCESSING CHECKPOINT TOOLS TEMPLATES - Workpapers Products - Thomson Reuters PPC

22 CREATING NEW CHECKPOINT TOOLS DOCUMENTS Creating New Checkpoint Tools Documents To create a new document: 1. Select your Checkpoint Tools product from the applications tree listing (PPC's Engagement Letter Generator, PPC's Interactive Disclosure Libraries, etc.). 2. Select one or more templates that you want to use to create your new documents. 3. Click the Open Document(s) icon in the File section at the top of the screen. The new documents will be created from the selected templates. 4. If you selected a single document, it will open in its native application. 5. If you selected multiple documents (by holding down your Control key while selecting additional templates), when you click Open Document(s), you will establish your document storage location from the Checkpoint Tools - Select a Folder to Store Documents dialog screen. After you select a folder and click OK, you will see the Checkpoint Tools - Documents Engagement Folder and Information (Share Data) dialog screen. Click here for more information: Share Data Best Practice: Save Practice Aids documents in the same folder if you want to share data among them. (See the Share Data topic in Practice Aids help for more information.) Note: On the right-side of the dialog screen, you will see an Instruction box and Description box. Only PPC's Workpaper products will have descriptions for the categories and workpapers

23 USING THE TICKMARKS TOOLBAR Using the Tickmarks Toolbar You can use the Checkpoint Tools set of predefined and customizable tickmark symbols to help organize comments and workflow processes in any of your Checkpoint Tools documents. Note: Only defined tickmarks will be displayed. To use the Tickmark toolbar: 1. Select Tickmark Toolbar from the PPC tab at the top of an opened document. The Tickmarks section will display in the top right of the ribbon menu. The Tickmark Toolbar can be docked to any edge of the Word or Excel window by selecting it with the cursor, and dragging, or the toolbar can be un-docked by dragging it away from the edges. 2. To add a tickmark to a workbook, select the cell or field where you want to add the tickmark. 3. Select the checkbox next to Tickmarks to display the available tickmarks: 4. Select a tickmark to insert into your document. Note: In Excel, you can choose the alignment of your tickmarks by selecting Options from the Tickmarks section. In the Options dialog, select either the Left or Right option, and then click OK. To add a Tickmark Legend to a workpaper: 1. Select Insert Legend from the Tickmarks section. 2. In the Insert Legend dialog screen, select the check boxes for each tickmark symbol you want to include in the legend. 3. Click OK. You can also define individual symbols to customize your set of tickmarks for your unique needs. To define tickmarks: 1. Select Define Tickmarks in the Tickmarks section. 2. Enter a description into the field for the tickmarks you want to define. Note: While some tickmarks are provided with predefined descriptions, these can also be edited. To remove the Tickmarks Toolbar, click the Close icon "X" in the top right corner of the tickmarks palette

24 ENTERING DATA Entering Data Enter data in a document by using native Microsoft Word/Excel functionality. For more information about using Microsoft Word/Excel, select Microsoft Word/Excel Help from the Help menu

25 PRINTING Printing PPC's Checkpoint Tools use the same basic features of Microsoft Word/Excel. 1. To print a document, left-click the Office button in the top left of the screen. 2. Then left-click the Print icon to open the Print dialog screen, from which you can adjust variables such as selecting a printer, paper size, and print quality. 3. Click OK. Note: After you click the Office button and before you click the Print icon, if you hover your cursor over the Print icon, three options appear to the right of the menu: Print, Quick Print, and Print Preview

26 SAVING Saving PPC's Checkpoint Tools use the same basic features of Microsoft Word/Excel. To save a document: 1. Click the Save icon next to the Office button. Or left-click the Office button and click either the Save icon or the Save As icon. 2. For more information about using Microsoft Word/Excel, select Microsoft Word/Excel Help from the Help menu

27 VIEWING Viewing PPC's Checkpoint Tools use the same basic features of Microsoft Word/Excel. To open a document: 1. Left-click the Office button. 2. Left-click the Open icon. 3. Browse to the location of the file you want by using the Explorer view in the Open dialog screen. 4. When you have selected the document you want to view, click the Open button. For more information about using Microsoft Word/Excel, select Microsoft Word/Excel Help from the Help menu

28 PRODUCT EXPIRATION Product Expiration To ensure you have the most current content and to assist you with peer review, Checkpoint Tools for PPC are updated annually. With annual updates, you retain full template functionality. For subscriptions not renewed, templates will provide only read and print functionality, beginning two years after the product's original release date

29 LINKS TO CONTENT Links to Content Checkpoint Tools for PPC products contain links to PPC reference materials. Selecting a link will open the related reference material if you have a valid Reference Library or Checkpoint subscription to the material. The first time you select one of these links, you will be prompted to choose the location of your reference material: Reference Library RIA Checkpoint None If you select Reference Library, the selected content link in the Checkpoint Tools document will automatically open Reference Library and display the related reference content. Note: You must be a licensed Reference Library user to use these links. If you select RIA Checkpoint, the link selected in a document will open your Internet browser. You will be prompted for your Checkpoint User ID and password on the Checkpoint login screen. Once you log in to Checkpoint, the links' referenced content will be displayed in your browser window. Note: This option is valid only for Checkpoint Tools released after April Content released prior to April 2005 will not have Checkpoint-enabled links. If you select None, the content links selected in your Checkpoint Tools documents will not link out to reference materials, and you will not be prompted to set a preferred location again. Once your selection is made in the Set Location of Reference Materials dialog screen, you will not be prompted again. If you want to change the location of your reference materials, simply: 1. Choose Tools Options Set Location from the Checkpoint Tools for PPC application menu, or 2. From a Word/Excel document, select Content Settings from the PPC menu

30 LATEST VERSION REPORT Latest Version Report Checkpoint Tools for PPC now provides a printable report that lists your installed Checkpoint Tools products, along with the version number. To access this report: 1. Select Latest Version Report from the Tools section at the top of the screen to display a list of all installed Checkpoint Tools products, (Engagement Letter Generator, Disclosure Libraries, etc.). 2. Print the report, if necessary. Note: Products not updated since 2003 will not be listed in this report

31 USING CHECKPOINT TOOLS WITH CSI'S VIRTUAL OFFICE Using Checkpoint Tools with CSI's Virtual Office Once you access the Virtual Office environment from the Internet, you will be provided the Checkpoint Tools for PPC icon to launch the product. You can also launch Checkpoint Tools for PPC from within Engagement Solutions, Microsoft Word or Microsoft Excel. When Checkpoint Tools for PPC is started, you will be prompted for your PPC account number, also known as your Firm ID. You can find your PPC account number on your invoice. First-time users will be prompted to accept the Checkpoint Tools License Agreement. Once you accept all agreements, a listing of your licensed products will be returned and displayed in the Checkpoint Tools for PPC application. If you own products under different Firm IDs, use the Set/Update PPC Acct. # option under the Tools VO Options menu to change the Firm ID, and a listing of that firm's licensed products will be displayed. If, at any time, you want to refresh your list of products, simply select the Refresh Product List option under the Tools VO Options menu. Note: This option is used whenever you purchase new products and want to update your product listing. The PPC menu will be displayed in Microsoft Word and Microsoft Excel whenever you are working in the Virtual Office environment. If you want to turn off the PPC menu, return to the Checkpoint Tools for PPC application and choose Tools Options Program Settings and clear the box check box for displaying the PPC menu

32 WHICH CHECKPOINT TOOLS PRODUCTS ARE DISPLAYED IN VIRTUAL OFFICE? Which Checkpoint Tools Products are Displayed in Virtual Office? When using Checkpoint Tools for PPC in the Virtual Office environment, only your site-licensed products will be displayed in the Checkpoint Tools for PPC application. A site license permits an unlimited number of users, at one physical office location, to access a product. If you own site licenses to multiple products under different account numbers, understand that only one account numbers' site-licensed products can be displayed at a time. Note: If you do not see all your site-licensed products in the Checkpoint Tools for PPC applications, it is possible that PPC has not updated your account. It may take 24 hours for changes to your account to be reflected. To refresh your list of products: 1. Select VO Options from the Tools menu. 2. Click on Refresh Product List option. 3. An updated display of site-licensed products should be displayed in your Checkpoint Tools for PPC application. Note: You must have an internet connection for the Refresh Product List option to function properly

33 USING CHECKPOINT TOOLS REFERENCE LINKS IN VIRTUAL OFFICE Using Checkpoint Tools Reference Links in Virtual Office Checkpoint Tools for PPC products contain links to PPC reference materials. Clicking a link will open the related reference material if you have a valid RIA Checkpoint subscription to the material. The first time you select one of these links, you will be prompted to choose where you want the content to come from: 1. RIA Checkpoint 2. None If you choose RIA Checkpoint, you will be prompted for your Checkpoint User ID and password at the RIA log in screen. Once you log into Checkpoint, the referenced content will be displayed in your browser window. Note: This option is only valid for Checkpoint Tools released after April Content released prior to April 2005 does not have Checkpoint enabled links. If you choose None, the content links selected in your Checkpoint Tools documents will not link out to reference materials, and you will not be prompted to set a preferred location again. Once your selection is made in theset Location of Reference Materials dialog, you will not be prompted again. If you want to change the location from which your reference materials come, simply: 1. Choose Tools Options Set Location from the Checkpoint Tools for PPC application menu, or 2. Select Content Settings from the PPC menu when in a Word or Excel document

34 CHOOSING BETWEEN CORE PACKAGE AND SPECIFIED RISK Choosing between Core Package and Specified Risk The core and specified risk audit programs are considered a starting point for developing an audit program. The authors anticipate that auditors will tailor the majority of the PPC audit programs for individual financial statement audit areas to respond to their client's specific risks and circumstances. Auditors should refer to detailed guidance included in PPC specialized industry guides. The PPC core audit programs include both general audit programs and audit programs for specific financial statement audit areas. The authors developed the specified risk set of audit programs based on a set of underlying risk assumptions at the assertion level for most audit areas that are common to many small, nonpublic audit engagements

35 OPENING A NEW PRACTICE AID Opening a New Practice Aid You can select a link to another practice aids document within the same title and then open an instance of that document: 1. To select a link to another practice aid, select Options in the Tools section at the top of the screen. 2. Click Set Location. 3. The following screen opens, with the default selected for "Open references to practice aids as PPC's Practice Aids documents."

36 OPENING A NEW PRACTICE AID Note:This default remains selected until you deselect it. A document with links to another practice aids document exists within the same title. Selecting a link to a practice aids document will launch an instance of the selected document. The original practice aid document remains open with all current functionality available. The instance of the document selected from the link will open with all current functionality available. Closing the instance of the linked document will return the user to the point of origin. Existing links to sections or to FASB links will continue to use the current content setting selected by the user. If the practice aid to which the link refers does not exist, the user will receive the following message: "<Practice aid document name> is not available." 4. Click OK to return to the point of origin

37 SHARE DATA Share Data With the Share Data feature, you can share information, such as the client's name and engagement date, with other documents in the same folder location. To use this feature when creating multiple documents: 1. Select the documents you want to create from the Checkpoint Tools for PPC application. 2. Select the PPC tab. 3. Select Share Data in the Document Options section at the top of the screen. On the Checkpoint Tools Save As dialog screen, set the path where you want your documents saved. This location will be used to store your client/engagement information, which can be reused with other documents, if saved in this same location. a. To select an existing document folder, select the folder from the tree display. b. To create a new document folder, type the path and folder name and select Create Folder button. c. Then click Save to access the Checkpoint Tools - Documents Engagement Folder and Information (Share Data) dialog screen. 4. Next, you will be prompted for the Client Name and Engagement Date. If this information already exists in the location where the documents are being saved, it will be displayed, and the Engagement Folder Selection box will not be editable. Note: The Client Name and/or Engagement Date can be updated. To use the updated information only on the current documents you are creating, check the box at the bottom of the screen. If you want to update all documents in the same location with the updated client/engagement information, do not check the box. Note: The Client Name field is used in the Tax Practice Aids products whenever the document has a field labeled either Client or Name/ID. Enter only the client name in fields labeled Client. For fields labeled Name/ID, enter both the client name and the client's ID number. 5. Once you've decided how you want to use the information, click OK. The documents you selected will be created and saved to the location you set. 6. The final screen will display your documents by name. a. To open documents, select one or more documents from the list and click Open. b. To create more documents, select Finished, and you will return to the Checkpoint Tools application. Note: To update stored information for a document, either double-click the Client Name or Engagement Date field in a document, or select Share Data from the PPC menu

38 REVIEW AUDIT PROGRAM CHANGES Review Audit Program Changes This feature provides the capability to track changes made to Audit Programs and is available only for Audit Programs. To use this feature: 1. Select Review Audit Program Changes from the PPC menu. 2. You can show, hide, accept, or not track changes. Note: Once you select the Accept Changes option, subsequent changes to the audit program are no longer tracked. 3. To track changes after Accept Changes has been selected, use Microsoft Word's native Track Changes function (Review Track Changes) 4. The Review Audit Program Changes functionality includes a global setting to control the way changes are displayed and tracked by default. This option can be accessed via Settings on the PPC menu ribbon for PPC s Practice Aids Audit Programs. 5. The Review Audit Program Changes dialog settings will override the global settings for the open document within the current session

39 DELETE PRACTICAL CONSIDERATIONS Delete Practical Considerations With this feature, you can finalize a letter for printing by deleting all practical considerations and related notes. To use this feature: 1. From the PPC menu, select Finalize for Printing. 2. Click OK to delete all practical considerations, as well as all endnotes, headers, footers, the letter title and the type of letterhead. You will be prompted to confirm this selection, because it cannot be reversed. Note: This feature is available only in Office-based Practice Aid letters

40 TICKMARKS Tickmarks You can add tickmarks in both Microsoft Word and Excel. The Tickmarks Toolbar is available from the PPC menu, and you can insert tickmarks and a tickmark legend. The tickmark legend will be inserted at the bottom of Word documents. Once you define a tickmark, the definitions will be saved immediately. You can insert tickmarks into all document types except the following: Areas denoted as hidden (such as Practical Considerations) Areas that contain a text box, callout, comment, footnote or endnote User documents that are protected When the clipboard is not available or has been turned off Note: In Microsoft Word, tickmarks are visible only in Web Layout or Print Layout views. Also, we recommend not changing the current tickmark styles because that could inhibit any future rollforward feature

41 UNSIGNED AUDIT PROGRAM STEP VISUAL CUE Unsigned Audit Program Step Visual Cue For audit programs, the color-coded columns are designated as sign-off areas. When a step sign-off is entered, the color will be removed. When the step sign-off is removed, the color will return. Note: This feature is available only for Audit Programs

42 SHOW PRACTICAL CONSIDERATIONS Show Practical Considerations You can view or hide practical considerations in checklist documents or audit programs. To use this feature: 1. Select theshow Practical Considerations checkbox from the PPC tab. 2. To show practical considerations in client letters: a. Hover your cursor over any bolded superscript letter in the practice aid to view the text of the related practical consideration. b. When you double-click the letter, the focus will be moved to the bottom of the letter to the actual practical consideration. From there, you can double-click the letter to return to the original link in the letter. Changing the Color of the Practical Considerations Text The default color for Practical Considerations text is light blue. To change to another color or to a different shade of blue, perform the following steps: 1. From the ribbon menu at the top of the Home tab, select Options. 2. On the Checkpoint Tools - Application Options screen, click the drop-down arrow in the Document Settings section

43 SHOW PRACTICAL CONSIDERATIONS 3. Select a new color. 4. Click OK. Delete Practical Considerations To use this feature: 1. From the PPC tab, select Delete Practical Considerations. You will be prompted to confirm this selection, as it cannot be reversed. 2. Click OK to delete all practical considerations

44 ADDING PPC COMMENTS TO AN AUDIT PROGRAM Adding PPC Comments to an Audit Program You can insert comments into a Checkpoint Tools audit program document. To use this feature: 1. Place your cursor in the document where you want your comments to appear. 2. From the ribbon menu, select the PPC tab. 3. In the Document Options section, select Add PPC Comments. 4. Type your comments

45 SEARCHING THE CHECKPOINT TOOLS TREE Searching the Checkpoint Tools Tree To search the Checkpoint Tools tree for a specific document. 1. Select Search Checkpoint Tools tree at the top of the screen. 2. Enter text in the Find field. 3. Then click the Find Next button to search for the next match in the tree view. The first document meeting your criteria will be highlighted. 4. Double-click to open that document. 5. Select the Close icon to close the search dialog box

46 PRINT PRACTICAL CONSIDERATIONS Print Practical Considerations You can print or not print practical considerations in checklist documents or audit programs. To use this feature: 1. Select the Print Practical Considerations checkbox from the PPC tab. Note: This feature is available only in Microsoft Word

47 CONFIGURE SIGN-OFF Configure Sign-off The user can indicate a single step sign-off of a step or multiple sign-offs of a conclusion step with either user initials and optional date sign-off or the N/A option. To use this feature: 1. To configure the Sign-Off information, enter the initials or other Sign-Off information to display in the signoff column of the audit program or checklist. 2. Click in the Include Date box to include the Sign-Off date in each Sign-Off

48 STEP SIGN-OFFS Step Sign-offs The user can indicate a single step sign-off of a step or multiple sign-offs of a conclusion step with either user initials and optional date sign-off or the N/A option. To use this feature: 1. Open the applicable document and place your cursor in a sign-off column. 2. Select the PPC tab. Or, you can also insert step sign-offs by using the right-click menu

49 CHECKMARKS Checkmarks You can insert a checkmark in designated columns of applicable checklists. To use this feature: 1. Place your cursor in a checklist column. 2. Select the PPC tab. 3. Select Checkmark from the Document Options section at the top of the screen. 4. Press F4 to repeat the checkmark symbol on another line or in another column. Note: This feature is available only in certain designated columns (Yes, No, N/A, for example). It is not available in audit programs or letters

50 CLEAR ALL SIGN-OFFS/CHECKMARKS Clear All Sign-offs/Checkmarks To clear all sign-offs in audit programs and checklists, simply select the Clear All Sign-offs/Checkmarks option from the PPC tab. This feature clears all text in applicable sign-off columns. Note: You will be prompted to confirm your selection. Once cleared, sign-offs cannot be restored

51 WORKPAPER REFERENCES Workpaper References By using native Microsoft Office hyperlink functionality, you can enter references to other documents, for example, from an audit program to the workpaper that is documenting the work performed. Using most paperless engagement software programs, you can also maintain and enter workpaper references

52 EDIT PRACTICE AIDS Edit Practice Aids You can edit all parts of a practice aid by leveraging native Microsoft Office functionality. Note: We strongly suggest that existing styles and attributes defined in the document not be changed or removed. Changes or removal of custom properties could result in a malfunction of the practice aids

53 FINALIZE FOR PRINTING Finalize for Printing The Finalize for Printing option in Confirmation Letters and Correspondence Letters (CL) in PPC s Practice Aids has been updated to remove the publication title and letterhead notation, and it also converts links to content to text. 1. To finalize a letter for printing, select PPC Finalize for Printing. The following message is displayed: "This will delete all endnotes, headers, footers, practical considerations, the letter title and the type of letterhead. Click OK if you want to proceed. Click Cancel if you do not wish to proceed." 2. Click OK to remove the following items: Endnotes Headers Footers Practical Considerations The letter title (e.g., ASB-CL-1.1:Audit Engagement Letter) The letterhead type [xxx letterhead type](e.g., [CPA Firm's Letterhead]) Content links: converted in the letter from content in the Reference Library or in Checkpoint to non-actionable text (no longer a link) 3. Selecting OK will save the changes and close the dialog screen, and you will return to your point of origin

54 RECALCULATE TOTALS Recalculate Totals 1. You can recalculate the fields in a Practice Aids document by right-clicking in the document and selecting Recalculate from the shortcut menu. 2. Alternatively, you can select Recalculate from the Checkpoint Math section at the top of the PPC tab:

55 INSERTING AND DELETING ROWS INCLUDED IN A FORMULA Inserting and Deleting Rows Included in a Formula You can modify the formula area of a Practice Aid by inserting or deleting rows. A border displays around the rows of any formula that permits the insertion or deletion of rows: 1. To insert a row, position your cursor in a row within the border and right-click. 2. From the shortcut menu, select Insert New Math Row. The new row will appear below your cursor position. To delete a row, place your cursor in the row that you want to delete and right-click to open the shortcut menu. Select Delete Math Row. Alternative: From the ribbon menu, select the PPC tab. Then select either Insert New Math Row or Delete Math Row from the Checkpoint Math section

56 SHOW/HIDE MATH TABLES Show/Hide Math Tables A border displays around the rows of any formula that permits the insertion or deletion of rows: You can show or hide the borders by right-clicking in the document and selecting either Show Adjustable Math Tables or Hide Adjustable Math Tables from the shortcut menu. Alternative: From the ribbon menu, select the PPC tab. Then select Hide Math Tables or Show Math Tables from the Checkpoint Math section in the top right of the screen. Note: When you print a worksheet containing formulas, the borders will appear in the printed version only if the document is in Show Math Tables mode. To print the worksheet without formula borders, make sure you select Hide Math Tools before you select the Print option

57 USING PPC'S PRACTICE AIDS WITH CSI'S ENGAGEMENT SOLUTION Using PPC's Practice Aids with CSI's Engagement Solution CSI s Engagement Solution users can easily add a PPC s Practice Aid to an engagement by using Engagement Solution: File New Document PPC's Practice Aid feature. See Engagement Solution help for more information on how to add documents

58 SHARING DOCUMENTS WITH CLIENTS Sharing Documents with Clients PPC s Practice Aids provides secured and unsecured documents that you can share with clients and colleagues. Secured Excel and Word documents (such as Audit Programs and some checklists) will function as read-only documents when sent to clients or other unlicensed users. Non-secured Excel and Word documents such as letters and some checklists have full-edit capabilities when sent to clients or other unlicensed users

59 ACCESSING PPC TEMPLATES THROUGH MICROSOFT WORD OR EXCEL'S FILE/NEW MENU Accessing PPC Templates through Microsoft Word or Excel's File/New Menu To create a new document from the latest PPC template, PPC recommends that you select Create New Workpaper from Microsoft Word or Excel's PPC menu. Then select your templates from the selection screen. You may be able to view or access certain PPC templates by choosing File New from the Microsoft Word or Excel main menu. That method of accessing PPC templates is not recommended, however, because you will not be able to access all of the PPC templates, and it does not ensure that you have access to the latest versions of the templates

60 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT Using PPC's Practice Aids with ProSystem fx Engagement Many customers have enjoyed the benefits of using PPC s Practice Aid documents with popular paperless engagement software packages. Although not as tightly integrated as Engagement CS, part of the CS Professional Suite from Thomson Reuters packages such as ProSystem fx Engagement can also be used in ways that maximize their effectiveness. This document will walk you through the process of creating a master engagement, one of the best practices for working with Checkpoint Tools and ProSystem fx Engagement. To pre-define a master engagement, use the New Binder Wizard. Note that all appropriate Practice Aids titles should be installed to the folder where ProSystem fx Engagement templates are located. (C:\Pfx Engagement\WM\Workpaper Templates) You can create the master engagement binder for a client in the Central File Room or in the local file room and synchronize it later. Enter the information for the binder, which you can create from a blank binder, from a sample binder or template or from an existing binder

61 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT Provide any additional information for the binder and click Finish. On the Completing the New Binder Wizard screen, click Create

62 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT Open the binder and add PPC s Practice Aids documents. For example, select the tab for 1300 Risk Assessment, right-click and select New Workpaper From Template

63 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT From the New Workpaper dialog screen, select the tab for the appropriate Practice Aids title: 2007ASB, for example

64 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT Select the ASB-CX-3.2 Walkthrough Documentation Table document and click OK

65 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT Enter an index number, verify the Roll Forward information and click OK. The document will begin processing and will be added to the binder. Repeat the steps to add additional documents to the binder. Once the binder is completed and synchronized with the Central File Room, you can share it with other staff members. For staff needing access to the pre-defined master engagement, the master binder should be synchronized from the Central File Room. Note that the appropriate Practice Aids documents should also be installed on the other staff members' workstations. Then, during completion of the New Binder Wizard, select the option to create a binder from an existing binder in your local file room, which will create a new binder that uses the pre-defined master engagement binder as the template

66 USING PPC'S PRACTICE AIDS WITH PROSYSTEM FX ENGAGEMENT After the New Binder Wizard is complete and the binder is created, the new binder will contain the tailored set of Practice Aids documents for beginning the engagement

67 USING PPC'S PRACTICE AIDS WITH CASEWARE Using PPC's Practice Aids with CaseWare With CaseWare, you can create a document link to any Checkpoint Tools document. First, use Checkpoint Tools to create the document and save it. It is recommended that you use a separate folder for each engagement to ensure optimal workpaper organization and facilitation of the Share Data feature. All of the Practice Aids documents for that engagement must be stored in the appropriate engagement folder or a sub-folder. Using CaseWare, select the Document menu and click New. Select Document Link and browse to the saved Checkpoint Tools document. (See CaseWare help for more information.)

68 MANAGING PPC'S PRACTICE AIDS WITHOUT PAPERLESS ENGAGEMENT SOFTWARE Managing PPC's Practice Aids without Paperless Engagement Software You can use PPC s Practice Aids without paperless engagement software. (You can use them with Word or Excel alone.) In that case, you should create a separate folder for each engagement, and all of the Practice Aids documents should be stored in that folder. This helps ensure optimal workpaper organization and facilitates the use of the Share Data features. (See the separate help topic on Share Data in PPC s Practice Aids Help.) Some users may want to create sub-folders within an engagement folder to group related sets of engagement documents (such as a Cash folder for all documents relating to cash). PPC s Practice Aids supports this approach. However, to use the Share Date feature, you should follow these steps: 1. Establish the engagement folder. 2. Create and store the documents under the engagement folder. 3. Create the sub-folders you need. 4. Move your documents under the applicable sub-folder. After these steps are followed for the initial Practice Aids documents in the engagement, you can save additional Practice Aids documents directly to their respective sub-folders. For best results, however, the PpcFieldData.xml should be located in the engagement folder rather than in a sub-folder

69 USING CHECKPOINT TOOLS WITH CSI'S VIRTUAL OFFICE Using Checkpoint Tools with CSI's Virtual Office Once you access the Virtual Office environment from the Internet, you will be provided the Checkpoint Tools for PPC icon to launch the product. You can also launch Checkpoint Tools for PPC from within Engagement Solutions, Microsoft Word or Microsoft Excel. When Checkpoint Tools for PPC is started, you will be prompted for your PPC account number, also known as your Firm ID. You can find your PPC account number on your invoice. First-time users will be prompted to accept the Checkpoint Tools License Agreement. Once you accept all agreements, a listing of your licensed products will be returned and displayed in the Checkpoint Tools for PPC application. If you own products under different Firm IDs, use the Set/Update PPC Acct. # option under the Tools VO Options menu to change the Firm ID, and a listing of that firm's licensed products will be displayed. If, at any time, you want to refresh your list of products, simply select the Refresh Product List option under the Tools VO Options menu. Note: This option is used whenever you purchase new products and want to update your product listing. The PPC menu will be displayed in Microsoft Word and Microsoft Excel whenever you are working in the Virtual Office environment. If you want to turn off the PPC menu, return to the Checkpoint Tools for PPC application and choose Tools Options Program Settings and clear the box check box for displaying the PPC menu

70 ASSIGN A NEW SHORTCUT KEY FOR STEP SIGN-OFFS Assign a New Shortcut Key for Step Sign-offs 1. In Word 2007, left-click the Office button and select Word Options. 2. Select Customize from the left frame of the screen that opens. 3. At the bottom of the next screen, click the Customize button to the right of "Keyboard Shortcuts." The Customize Keyboard screen opens:

71 ASSIGN A NEW SHORTCUT KEY FOR STEP SIGN-OFFS 4. From the Categories drop-down menu, scroll down and select Macros. 5. From the Macros drop-down menu, scroll to PPC_SignOff. (To assign a shortcut key for Step Signoff NA, select PPC_SignOffNA.) 6. Place your cursor in the Press New Shortcut Key field. 7. Perform the shortcut key combination you want to assign to this macro. Warning: If you assign a new key combination that it is currently used for an existing Word feature, the existing shortcut key will be overridden. 8. If you want this keystroke to apply to all documents, select Normal.dotm under Save changes in. Otherwise, select the document. Note: To use the new shortcut for all Word-based Practice Aids, select Normal.dotm. 9. Click Assign. (The new shortcut combination will appear in the Current keys box.)

72 ASSIGN A NEW SHORTCUT KEY FOR STEP SIGN-OFFS Restore Word Shortcut Key Assignments to the Original Settings 1. Left-click the Office button and select Word Options. 2. Select Customize. 3. Click the Customize button to the right of "Keyboard Shortcuts." 4. In the Save changes in box on the Customize Keyboard screen, click the document name or template that contains the shortcut key assignments you want to restore. 5. Click Reset All

73 USING THE PPC'S ENGAGEMENT LETTER GENERATOR Using the PPC's Engagement Letter Generator To use PPC s Engagement Letter Generator for creating an engagement letter, follow these steps in order: 1. In Checkpoint Tools, open a template from the PPC's Engagement Letter Generator folder. 2. From the PPC menu, select Create New Workpaper to select a template that is appropriate for your engagement. 3. To use PPC s automated customization features, select Customize a Letter from the PPC menu, which will launch the PPC Letter Customizer. See the steps below on using the PPC Letter Customizer. 4. Review the letter for any content that was omitted or entered incorrectly in the PPC Letter Customizer. If necessary, run the PPC Letter Customizer again, or make the changes manually. CAUTION: Be careful about running the PPC Letter Customizer a second time. It is recommended that you do not run the dialog again on a letter that has been closed because of the risk of unintended modification of the letter content. 5. Review the letter and make additional changes as needed to reflect your firm s preferences and the unique circumstances of the engagement. Be alert for any additional fields or bracketed items indicating that more detailed customizing is needed. 6. After all changes have been made, prepare your document for printing by clicking Finalize for Printing from the PPC menu. (This function will permanently change your document.) 7. Print the letter onto your firm s stationary, if needed. Using the PPC Letter Customizer 1. On the PPC Letter Customizer window, enter your preferences on each of the tabs, including letter format, sender information, client information and other details about the engagement. 2. On the Additional Paragraphs tab, select optional or alternate language to include in the letter by selecting each respective check box. Notes: To see an example of the optional/alternative language, click on the? icon next to the respective text. The optional text is inserted permanently into the document, so it must be deleted manually. 3. Click OK to insert the content and apply the customized settings you entered

74 CLEARING CONTENT FROM A LETTER Clearing Content from a Letter To clear the input information from the letter, select Clear Letter Content in the ELGR (Engagement Letter Generator) section of the PPC menu

75 FREQUENTLY ASKED QUESTIONS Frequently Asked Questions For best results, always follow the procedures as listed under the help topic Using PPC s Engagement Letter Generator. Failure to follow these steps can result in unintended loss or modification of letter content. 1. Can I change the format (fonts, margins, paragraph spacing, etc.) of the engagement letters? Yes. The letter format is fully customizable. Letterhead spacing, footers, and overall style can be modified in the PPC Letter Customizer (discussed in the help topic Using PPC s Engagement Letter Generator ). To change fonts or make other format modifications, refer to Microsoft Word help. 2. Can I use the Microsoft Word letter wizard with the PPC letter templates? No. The PPC engagement letter templates do not support the Microsoft Word Letter Wizard. 3. When I open a letter or template, all I see is a page with a box telling me to enable macros. What is the problem? Macros must be enabled to use PPC s Engagement Letter Generator templates or letters created from those templates. Depending on your macro settings, you may have been prompted to Enable macros. In that case, click the Enable Macros button. Otherwise, you must lower your macro virus protection settings to Medium to enable use of the templates. Refer to Macro Virus Protection in Microsoft Word help for more information about changing your settings. 4. When I customize my letter, my letter has several messages saying Error! No document variable supplied. What s wrong? There are certain fields in the Word template that are automatically populated from the PPC Letter Customizer. This message appears if you do not enter information into the corresponding entry fields in the PPC Letter Delete the field if it is not needed. Manually replace the message with the correct information. Rerun the PPC Letter Customizer.CAUTION: Be careful about running the PPC Letter 5. Is there a quick, easy way to delete the Practical Considerations from the letter? Yes. These items will be deleted automatically when you finalize your document for printing by selecting Finalize for Printing from the PPC menu

76 WELCOME TO PPC'S 1120 WORKPAPERS Welcome to PPC's 1120 Workpapers This Help topic provides information about using PPC's 1120 Workpapers. To view a specific topic, simply click the topic name in the navigation pane of the Help viewer. Special Note for Printing PPC Workpapers use the same basic features as Microsoft Excel for working within Workpaper templates. To print a workbook, left-click the Office button and select Print. On the Print dialog screen, you can adjust variables such as selecting a printer, paper size, and print quality. Use the following steps for an efficient way to ensure that the proper print range is selected: 1. Select the View tab. 2. Click Page Break Preview in the Workbook Views section at the top left of the screen. 3. Select the area to print by dragging and dropping the dark blue lines to define the print range. Dotted lines indicate page breaks and can be adjusted in the same manner. Pass the cursor over the lines until a double arrow appears. Left-click and drag the line to the point you want. 4. Review the information shown to ensure you have highlighted the correct print range. 5. Left-click the Office button and select Print. Note: To return to the worksheet, select Normal in the Workbook Views section

77 ACCRUAL TO CASH CONVERSION Accrual to Cash Conversion This template should be used for a company that keeps its financial books on the accrual basis, but is eligible for and does report on the cash basis for tax return purposes. This template is not intended to compute the section 481A adjustment for a change in accounting method. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet in the Input table. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Additional lines can be inserted by clicking on the * at the bottom of the table. Enter the following information: Accounts/Adjustments: Accounts receivable Allowance for bad debts Accounts payable Wages payable Other payables (list) Payroll taxes payable (employer)

78 COMPLETED CONTRACT METHOD Completed Contract Method The purpose of this template is to compute the adjustment from financial statement income (using the percentage of completion method) to taxable income (using the completed contract method). Entering Information All of the information needed to produce the calculations is entered on the Input worksheet in the input tables. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Additional lines can be inserted into the tables as needed by clicking the * by the Total line. Complete the two input tables, as indicated. The first table is for contracts completed during the current year. The second table is for contracts that remain uncompleted at the end of the year. Enter the following information: For contracts completed during the year: Contract number (Optional input can be omitted.) Revenue and costs from the prior year Revenue and costs for the current year For contracts uncompleted at the end of the year: Revenue and costs before the beginning of the current year

79 COMPUTING 481(A) ADJUSTMENTS Computing 481(a) Adjustments This template computes the amount of the adjustment arising from a change in accounting method under IRC Sec. 481(a). When taxpayers change their accounting method, adjustments must be made to ensure that the change does not result in the omission or duplication of an item of income or expense. These adjustments, referred to assection 481(a) adjustments, quantify the cumulative effect that the change in method has on taxable income. A positive Section 481(a) adjustment increases income, while a negative Section 481(a) adjustment decreases income. Section 481(a) adjustments are taken into account over a varying period of time. Refer to the "Tracking 481(a) Adjustments template. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information as of the close of the tax year preceding the year of the change: Tax year of the change (Enter the four-digit tax year.) Accounts receivable Other accrued income (Enter the description and amount of other income accrued but not received.) Income received or reported before earned Accounts payable Accrued salaries Other accrued expenses (Enter the description and amount of other expenses accrued but not paid.) Prepaid expenses previously deducted Supplies on hand previously deducted Inventory on hand previously deducted Other amounts previously deducted (Enter the description and amount of other amounts previously deducted.) Other amounts (Enter the description and amount of any items that are not accounted for in any of the other categories.)

80 TRACKING 481(A) ADJUSTMENTS Tracking 481(a) Adjustments This template tracks the adjustments resulting from a change in accounting method under IRC Sec. 481(a). When a taxpayer changes its accounting method, adjustments must be made to ensure that the change does not result in the omission or duplication of an item of income or expense. These adjustments, referred to as Section 481(a) adjustments, quantify the cumulative effect that the change in method has on taxable income. A positive Section 481(a) adjustment increases income, while a negative Section 481(a) adjustment decreases income. See the Computing 481(a) Adjustments template for the computation of the amount of the Section 481(a) adjustment. These adjustments are taken into account over varying periods of time on a prospective basis. For this purpose, a short year is treated as a full year. This template tracks up to 10 adjustments. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Description of the adjustment The tax year that the adjustment is first made The total amount of the adjustment The number of years over which the adjustment is to be made

81 CAPITAL LOSS CARRYFORWARD Capital Loss Carryforward The purpose of this template is to produce a carryforward schedule for IRC Sec. 1212(a)(1) capital losses. Entering Information All of the information needed to produce the carryforward schedule is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Use the two buttons at the top of the Input worksheet to select a carryforward schedule for a single capital loss or a combined schedule for multiple losses. Enter the following information: The tax year of loss (This value is used to generate the input table.) The amount of the loss: - Enter the loss (or losses, if the multiple loss option is selected) in the loss-generated column of the input table on the line that corresponds to the year that the loss occurred. - A column is provided in the input table to add comments or descriptions about the various losses entered. This information is not required for purposes of generating the carryforward schedule. The loss utilized: - Enter losses utilized in the loss-utilized column of the Input table on the line that corresponds to the year that the loss is deducted for tax purposes

82 NET OPERATING LOSS CARRYFORWARD Net Operating Loss Carryforward This template is used to generate a carryforward schedule for IRC Sec. 172(b) net operating losses generated and applied and to track when the losses expire. Entering Information All of the information needed to produce the carryforward schedule is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Use the two buttons at the top of the Input worksheet to select a carryforward schedule for a single net operating loss (NOL) or a combined schedule for multiple NOLS. Enter the following information: The tax year of the first NOL (This value is used to generate the input table.) The amount of the NOL (Enter the NOL or NOLs if the multiple loss option is selected in the loss-generated column of the input table on the line that corresponds to the year the NOL occurred.) The NOL utilized (Enter the NOLs utilized in the loss-utilized column of the input table on the line that corresponds to the year the loss is deducted for tax purposes.)

83 PASSIVE ACTIVITY LOSS CARRYFORWARD Passive Activity Loss Carryforward This template tracks the amount of passive activity losses to be carried forward. The passive activity loss (PAL) rules limit the deductibility of a taxpayer s losses and apply for both regular tax and alternative minimum tax (AMT) purposes. The PAL rules prevent taxpayers from using losses from passive investments to offset taxable income from nonpassive investments or from trades or businesses. Moreover, the rules limit deductions from passive activities to the current or future years PALs can never be carried back. The PAL rules apply to two types of C corporations personal service corporations and closely held corporations. Entering Information All of the information needed to produce the carryforward schedule is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information for each tax year: First tax year of the passive activity loss (Subsequent years are generated automatically.) Regular tax PAL generated AMT PAL generated The total of any AMT adjustments and preferences PAL deducted for regular tax purposes PAL deducted for AMT purposes

84 THREE-YEAR COMPARISON OF BOOK/TAX DIFFERENCES (M-1/M-3) Three-Year Comparison of Book/Tax Differences (M-1/M-3) This template summarizes the numerous book-tax adjustments necessary for preparing a corporate income tax return. Schedules M-1 and M-3, Form 1120 (Reconciliation of Income [Loss] per Books With Income per Return), reconciles these differences. The Schedule M-1 must be prepared by corporations with total receipts or total assets of $250,000 or more. The Schedule M-3 must be prepared by corporations reporting gross assets of $10 million or more in assets on Schedule L of Form However, corporations and partnerships with assets in excess of $10 million but less than $50 million will be allowed to file Schedule M-1 in place of parts II and III of Schedule M-3. Part I lines 1-12 of Schedule M-3 will still be required of these taxpayers. Change is effective for tax years ending December 31, 2014 and later. This template is designed to compare three years of book/tax differences. Its purpose is to aid in the review of these differences on an annual basis and in the preparation of Schedules M-1 and M-3. A worksheet is included for preparing the companion Form 8916-A for reporting the cost of goods sold on the Schedule M-3. A mapping of items on the M-3 Schedule to the M-1 Schedule is provided for quick reference. Entering Information All of the information needed to produce the reconciliation schedule is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the current tax year. (The prior two years will be entered automatically.) Enter the following information for each tax year: Net income (loss) per books Federal income tax (The tax benefit or refund should be entered as a negative.) Capital losses in excess of capital gains (C corporations only) Income subject to tax not recorded on books: Excess of tax over book gain on sale of assets o o o o o o o Excess of tax over book gain on sale of assets Prepaid rental income (recognized for tax but not book) Other prepaid revenue (recognized for tax but not book) Positive 481(a) adjustments (four-year spread on income recognition) Installment sale income Guaranteed payments (other than health insurance) Other income subject to tax not recorded on books

85 THREE-YEAR COMPARISON OF BOOK/TAX DIFFERENCES (M-1/M-3) Expenses recorded on books but not deducted on the return: o o o o o o o o o o o Excess of book over tax depreciation Contribution carryover (contribution limited for tax in current year) Nondeductible travel and entertainment Section 263A costs capitalized into inventory Bad debts (reserve method) Fines and penalties Key person life insurance premiums Excess over book over tax loss on sale of assets Organization and business start-up costs expensed in year incurred for book purposes Accrued vacation pay and bonuses paid more than 2 ½ months after year-end Other expenses recorded on books not deducted on the return Income recorded on books but not included on the return: o o o o o o o Tax-exempt interest income Excess of book over tax gain on sale of assets Key person life insurance proceeds Income reported on the installment method (recognized for book but deferred for tax) Prepaid rent (recognized for book but not tax) Other prepaid income Other income recorded on books but not included in the return Deductions on return not deducted for the books: o o o o o o o Excess of tax over book depreciation Contribution carryover from prior year deducted in current year Bad debt expenses (specific charge-off) Excess of tax over book loss on sale of assets Depletion (excess of percentage over cost) Amortization of organization and start-up costs previously expensed for book purposes Section 263A costs relieved from inventory

86 THREE-YEAR COMPARISON OF BOOK/TAX DIFFERENCES (M-1/M-3) o o Accrued vacation pay and bonuses from prior year not deductible until current year Other deductions on return not deducted for books

87 ACCRUALS - TAX BASIS Accruals - Tax Basis The purpose of this template is to compute the adjustment for vacation and bonus accruals and other accruals for which the recurring item exception election has been made. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet in the input table. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Additional lines can be inserted into the tables, as needed. To add lines, click the asterisk (*) in the left column. Enter the following information for each type of expense listed: Account number (optional) Ending book balance Amount paid within required time period The following expenses are listed: Advertising Benefits Bonuses Charitable contributions Commissions Deferred compensation Directors' fees Discounts Fees Insurance Interest Payroll Payroll taxes Severance Vacation

88 ACCRUALS - TAX BASIS Workman's compensation Others (list) (Insert additional lines as needed.) Inventory Reserves and Real Property Taxes Special rules apply to inventory reserves and real property taxes

89 BAD DEBT EXPENSE Bad Debt Expense The purpose of this template is to determine the amount of bad debt expense that is deductible for income tax. Entering Information All of the information needed to determine the deductible bad debt expense is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. At the top of the input worksheet are two buttons for selecting an accounting method. Click either the Tax Basis button for income tax or cash basis books or the GAAP button for accrual based books. This selection determines the input needed to calculate the deductible amount. Income Tax or Cash Basis Books Enter the following: Uncollectible accounts as of the end of the year Adjustment for bad debts collected during the year GAAP/Accrual-based Books Enter the following: Allowance for doubtful accounts at the beginning of the year Charge-offs of uncollectibles for the year Recoveries Bad debt expense per books Allowance for doubtful accounts at the end of the year

90 LEASE INCLUSION Lease Inclusion This template computes the amount (if any) to be included in gross income under IRC Sec. 280F(c) to offset rental deductions for business use of a leased auto, van, or truck for a term of 30 days or more. The inclusion amount is determined on a calendar year basis under tables published annually by the IRS, based on the FMV of the auto on the first day of the lease term. The inclusion amount is prorated, based on the number of days of the lease term included in a tax year and is adjusted, based on the percentage of business and investment use for that year. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: A description of the vehicle The year the vehicle was placed in service, which must not be later than the balance sheet date If this is the final year of the lease, check the box The name of the employee The FMV of the vehicle at the beginning of the lease term The number of days the vehicle was in service this year. (For this worksheet, a full year is defined as 365 days.) The percentage business use of the vehicle this year. - Enter as a decimal (e.g., 75% is entered as.75). Include in this percentage any personal use that was included in the employees' income. Lease Year Definitions The current lease year (i.e., the first year of the lease, second year, etc.) is calculated as the difference between the balance sheet date and the year placed in service. The current lease year table goes from one year to five years. If the actual lease year exceeds five years, then five will be used for the table look-up

91 MEALS AND ENTERTAINMENT Meals and Entertainment This template calculates the 50% disallowance of meal and entertainment deductions under IRC Sec. 274(n) and identifies nondeductible travel and entertainment expenses. It also calculates the meals and beverage expense for employees subject to the Department of Transportation hours of service rules.using information from the calculations, the template summarizes the deductible and nondeductible portion of meals and entertainment for tax reporting purposes. Additionally, it calculates the total nondeductible travel and entertainment to be reported as expenses recorded on the books for the current year that are not included/deducted on the tax return. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Meals and entertainment subject to disallowance (see below) Club dues (excluded from compensation) Spousal travel (excluded from compensation) Entertainment facilities Excess costs for convention on cruise ship Employee achievement awards exceeding $400 Disallowed luxury water travel Business gifts in excess of $25 Other nondeductible travel and entertainment expenses Meals and beverage expense for employees subject to DOT hours of service rules Skybox expense Face value of non-luxury box seat ticket Number of seats in skybox Cost of entertainment tickets Face value of entertainment tickets Meals and Entertainment Subject to Disallowance: To calculate meals and entertainment subject to disallowance, type the following information: Account name Account number

92 MEALS AND ENTERTAINMENT Total amount per account

93 SECTION 179 EXPENSE CARRYFORWARD Section 179 Expense Carryforward The purpose of this template is to produce a carryforward schedule for IRC Sec. 179 expenses. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Year to begin the schedule Section 179 expense carryforward (The amount of previously unused IRC Sec. 179 expense at the beginning of the year, entered as the first year for the schedule to be generated.) Section 179 expense carryforward AMT (The amount of previously unused IRC Sec. 179 expense for purposes of AMT, at the beginning of the year, entered as the first year for the schedule to be generated.) Input Table The input table has five columns. The first and third columns are yellow and should not be completed. The first column is generated (based on the year input) as the first year for the schedule. The third column is generated from the amount input in the second column. In the second column of the input table, enter the amount of Section 179 expense generated in the year shown in the first column. In the third column of the input table, enter the amount of Section 179 expense deducted for tax purposes in the year shown in the first column. In the fourth column of the input table, enter the expense deducted for AMT purposes for the year shown in the first column

94 DEPRECIATION AND SALE OF ASSETS Depreciation and Sale of Assets This template is designed to produce a summary report to tie out book and tax depreciation information. It is not designed to calculate detailed depreciation expense. A schedule of assets disposed of during the year can also be generated to facilitate the reconciliation of the net assets per book and net assets per tax. Entering Information All of the information needed to generate a depreciation reconciliation is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the information as indicated in the input tables. Additional lines for other categories can be inserted if needed, by clicking the asterisk (*). On the second worksheet Input Sale of Assets," enter the information needed to generate a schedule of assets sold. The box in the upper-left corner of the worksheet displays the asset categories shown on the Input sheet. There are also four other categories in the box. If you add additional categories on the first Input worksheet, you should rename these other categories to provide a complete list to use in the sale of assets schedule

95 ORGANIZATIONAL EXPENSES Organizational Expenses This template summarizes the organizational expenses to be amortized, calculates the amortization expense, and produces a tracking schedule for amortizing the expense. The taxpayer must timely elect to amortize the organization expenses. Otherwise, they will be capitalized and not amortized. Entering account numbers for every expense item can generate a reclassifying entry. If the input worksheet is completed, a journal entry is also generated to record the amortization expense. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Any gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Amortization period elected (The default is 60 months, but can be overridden.) 2004 Jobs Act election period (The default is 180 months, but can be overridden.) Date business began First tax year (Enter the first tax year-end.) Months in first tax year (This is calculated as the number of months from the business start date to the first tax year-end. The calculated number can be overridden.) Expense type categories (Seven default categories are supplied, which can be edited.) Expense type (Select from the drop-down menu.) General ledger (GL) number [Required only if the journal entry is to be generated to reclassify expenses from detail accounts to an organizational expense (asset) account.] Description/Date (This input is optional and is provided for information purposes only. Tracking the date that expenses are incurred may be beneficial when preparing the election to amortize the organizational expenses. Amount of expense (Enter as either a Pre or Post 10/23/04 cost.)

96 START UP COSTS Start up Costs This template summarizes the start-up costs to be amortized, calculates the amortization expense and produces a tracking schedule for amortizing the expense in future years. The taxpayer must make a timely election to amortize the start-up costs. Otherwise, they are capitalized and not amortized. Entering account numbers for each expense item can generate a reclass entry. If the input sheet is completed, a journal entry is also generated to record the amortization expense. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Amortization period elected (Default is 60 months, but can be overridden.) 2004 Jobs Act election period (Default is 180 months, but can be overridden.) Date business began First tax year (Enter the first tax year-end.) Months in first tax year (This is calculated as the number of months from the business start date to the first tax year-end. The calculated value can be overridden.) Expense type categories (Ten default categories are supplied, which can be edited.) Expense type (Select from the drop-down menu. Choose from the categories listed in the Expense Type Categories box. General ledger (GL) number [Required only if a journal entry is to be generated to reclassify costs from detail accounts to a start-up cost (asset) account.] Description (Optional - provided for information purposes only.) Cost (Enter as either a pre 10/23/04 cost; a 10/23/04 12/31/09 and post 2010 cost; or as a cost for years beginning in 2010.)

97 INSTALLMENT SALE DEFERRED GAIN Installment Sale Deferred Gain This template can be used to calculate and track the deferred gain on installment sales. All of the information needed to produce a carryforward for IRC Sec. 453 deferred gain on installment sales is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Entering Information Enter the following information: Property sold (Enter a description to identify the property.) Date of sale Tax year-end of sale Amount of sale Adjusted basis (Enter the adjusted basis of the property for both regular and AMT purposes.) Cost of sale Principal received (On the line corresponding to the tax year ended, as shown in Column a, enter the principal received each year.) Schedules Beginning after the First Year Complete the Gain Previously Reported box only if a schedule beginning after the first year is to be generated and the collections detail for prior years is to be omitted. In this case enter: Property sold Date of sale Gain on sale (Enter the gain for both regular tax and AMT.) Gross profit percentage (Enter the gross profit percentage for both regular tax and AMT.) Principal received (Enter the principal received for the year displayed in Column a of the input table.)

98 LIKE-KIND EXCHANGES Like-kind Exchanges The purpose of this template is to determine the tax gain to be recognized from a like- kind exchange transaction, compute the basis of the property received, and produce the tax-adjusting entry to properly record the transaction. Entering Information All of the information needed to determine the tax gain is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Date of the exchange Description of properties surrendered and received Fair market value of like-kind property received Liabilities (mortgage) surrendered and received Adjusted basis of like-kind property surrendered Accumulated depreciation of property surrendered Cash exchanged Exchange expenses Fair market value of non-like-kind property exchanged

99 ANALYSIS OF INVENTORY RESERVES Analysis of Inventory Reserves The purpose of this template is to determine how much of the inventory allowance is deductible for tax purposes and to calculate the M-1 adjustment. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Beginning balance of allowance for inventory Ending balance of allowance for inventory Inventory charge-offs Additions for obsolete inventory Additions for excess inventory Inventory offered for sale at reduced value

100 UNICAP SUMMARY UNICAP Summary This template summarizes the UNICAP timing difference between book and income tax. A reconciliation of Cost of Goods Sold is provided for both book and tax purposes. The uniform capitalization (UNICAP) rules of IRC Sec. 263A require businesses to capitalize (or treat as inventory costs) certain indirect costs that they previously deducted as period expenses. These costs are then deducted as the related inventory is sold. The practical effect is the deferral of a tax deduction for these expenses until the inventory is sold (usually in the following year), creating a timing difference between book and tax income. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Amounts per books: Beginning inventory Purchases Cost of labor Other costs included in cost of goods sold (CGS). Enter the description and the amount of other costs to be included in CGS. Ending inventory Section 263A costs: Included in beginning inventory Included in ending inventory Additional Section 263A costs per books. Enter costs (other than interest) not capitalized or included in inventory by the business under its pre-unicap method of accounting but required to be capitalized under UNICAP. New businesses enter costs that would have to have been capitalized had the business been in existence prior to the UNICAP rules

101 LOAN INFORMATION Loan Information The purpose of this template is to produce a loan amortization schedule and to calculate the current and long-term portion of the loan as of the balance sheet date. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter any three of the following amounts: Amount borrowed Interest rate Periodic payment Payback periods (in years)

102 PREPAID ASSETS RECONCILIATION Prepaid Assets Reconciliation This template reconciles prepaid assets and calculates the M-1 adjustment for any book/tax difference. The full amount of certain prepaid expenses can be deducted in the year of payment by cash basis taxpayers. Deductions for others (prepaid interest and rent, for example) must be prorated over the period of use of the asset or the time of performance of the services purchased. A blank journal entry is provided for any reconciling entries needed. Entering Information All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Description of prepaid asset Total amount of current year amortization for book purposes Category [Enter the prepaid asset category. For example, for prepaid insurance, enter the type of insurance (casualty, auto, workman s compensation, and so forth.] Payee Any beginning balances of prepaid assets (prior year prepaid assets) Number of months remaining for beginning balances Month of payment for current year payments (Enter the numeric value e.g. December is entered as 12.) Total amount (Enter the total contracted amount.) Down payment (Enter any down payment made.) Number of months the payment covers Number of months of coverage in current tax year (This calculation is automatic for calendar year corporations. Override this number for fiscal year entities.)

103 EARNINGS AND PROFITS (E&P) Earnings and Profits (E&P) This template calculates current and accumulated E&P, the amount of the dividends paid from E&P, and any dividend paid in excess of E&P. E&P determines the maximum amount that must be recognized as dividends if distributed to shareholders [IRC Sec. 316(a)]. See PPC s 1120 Deskbook, Key Issue 25D. Entering Information All of the information needed to produce the computation is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Current tax year (This field defaults to the balance sheet date entered in the heading, but can be overridden.) Increases to E&P: - Lines a. through r. represent the most common adjustment to E&P. Other increases can be added on line s. - Enter 100 percent of the IRC Sec. 179 amount. (An 80 percent allowed amount is a calculated amount.) Decreases in E&P: - The decreases listed are the most common. Others can be added on line p. - Enter 100 percent of the IRC Sec. 179 amount. (A 20 percent required amount is a calculated amount.) Total distributions made during the year Accumulated E&P at the beginning of the year Adjustments to beginning accumulated (Additional lines can be added in this area, as needed.)

104 RETAINED EARNINGS ROLLFORWARD Retained Earnings Rollforward The purpose of this template is to document and reconcile the changes in the equity accounts for the year. Entering Information All of the information needed to generate the workpaper is entered on the Input Worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Beginning of year balances in the equity accounts as shown in the input table Current year book income/loss Dividends paid both in stock and cash Transfers (Additional lines by clicking on the Insert Row button.) Adjustments (Additional lines by clicking on the Insert Row button.) Balance per financials

105 ACCUMULATED EARNINGS TAX COMPUTATION Accumulated Earnings Tax Computation This template calculates the accumulated earnings tax. The accumulated earnings tax (AET) is a penalty tax imposed on corporations for unreasonably accumulating earnings in the corporation. The tax is assessed at the highest individual tax rate on the corporation s accumulated income and is in addition to the regular corporate income tax. The tax is assessed by the IRS, rather than self-assessed by the taxpayer. If the input worksheet is completed, a journal entry is also generated to record the tax liability. Entering Information All of the information needed to produce the computation is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells. Enter the following information: Current tax year (Enter the four-digit year) Taxable income Net operating loss deduction Dividends received and paid deductions: - Section 243 dividends received deduction - Section 244 deduction for dividends received on certain preferred stock - Section 245 deduction for dividends received from certain foreign corporations - Section 247 deduction for dividends paid on certain preferred stock of public utilities - Section 561(a)(1) dividends paid during the tax year, not including dividends paid during the first 2½ months of the tax year that are considered Section 563 dividends for the prior year - Section 565 consent dividends - Section 563 dividends paid within the 2½ months after the close of the tax year Capital loss carryovers (Enter the amount of capital loss carryovers because these amounts are disallowed in computing accumulated taxable income. The current year disallowed capital losses are entered below.) Excess charitable contributions (Enter charitable contributions made during the year in excess of the deduction portion.) Capital losses disallowed (Enter the amount of current year capital losses that are disallowed for regular tax purposes.) Excess of net long-term capital gains (LTCG) over short-term capital losses (STCL) Taxes on excess net LTCG over STCL

106 ACCUMULATED EARNINGS TAX COMPUTATION Deduction allowed to bank affiliates (Enter the deduction for amounts used to purchase marketable securities, as required by the Board of Governors of the Federal Reserve System.) Federal and foreign income taxes accrued or deemed paid during the year (This amount does not include the accumulated earnings tax, the personal holding company tax, or any taxes imposed by corresponding sections of a prior income tax law.) Current year E&P retained for reasonable business needs: - Working capital requirement - Other reasonable needs Accumulated E&P at end of prior year Dividends paid from E&P after close of prior year, treated as paid during prior year

107 CURRENT AND DEFERRED INCOME TAXES Current and Deferred Income Taxes This template computes a company's federal income tax provision for financial reporting following SFAS No. 109, Accounting for Income Taxes. The template makes two calculations: one for the deferred provision and another for the current provision. This template has been enhanced to accommodate GAAP for uncertainty in income taxes introduced by FASB ASC 740, Income Taxes. Entering Data All of the data needed to compute the tax provisions is entered on the Input worksheet as follows: Beginning of year information The beginning of the year taxable and deductible temporary differences amounts are used to determine the change in temporary differences during the period. Likewise, adjustments to the beginning of the year taxable and temporary differences for tax positions that failed either the more likely than not (MLTN) recognition or measurement criteria of FASB ASC 740 are used to determine the change in temporary differences actually recognized on the financial statements. All of these inputs are then used in the current tax provision to convert financial statement pretax income (loss) to taxable income. [For tax positions that failed either the more likely than not (MLTN) recognition or measurement criteria of FASB ASC 740 and have been recognized in a tax return filed in the current year or in a previous year, the related temporary differences should not be recognized in the financial statements, but rather, recorded as a liability for unrecognized tax benefits.] The beginning-ofyear unrecognized tax benefit liabilities are used to compute the change in the liability amount, which is used in to calculate the current tax provision for the current year. The amount of deferred tax assets and liabilities at the beginning of the year are used to compute the period's deferred tax expense or benefit. While the tax effects of beginning of the year loss carryforwards should be considered in the beginning deferred tax asset amount, they should not be included in the beginning of the year deductible temporary differences amount. (Only deductible temporary differences, prior to applying the expected tax rate, should be included in the deductible temporary differences amount.) Also, enter the beginning deferred tax liability and deferred tax asset valuation allowance amounts as positive numbers even though they are credit balances. Expected future tax rate Enter the currently enacted tax rate that is expected to apply when temporary differences reverse and loss carryforwards are realized. Current tax provision information The current tax provision is determined by converting financial statement pretax income (loss) to taxable income (or tax loss) and applying current federal tax rates to that amount. While most of the information needed in that calculation is derived from amounts entered in other areas of the Input worksheet, certain information, such as financial statement pretax income (loss) and the tax benefits of carrybacks, is not and must be entered in this section. When entering amounts in this section, enter all amounts other than a financial statement pretax loss as positive numbers. Temporary differences Temporary differences are differences between the bases of assets and liabilities for financial statement reporting and their tax bases. Enter a description of each difference in the first column and the amount of the

108 CURRENT AND DEFERRED INCOME TAXES difference in the second or third column, depending on whether the asset or liability's financial basis is greater than or less than its tax basis. The template expects all assets to have debit balances and all liabilities to have credit balances. Thus, if an asset contra account such as accumulated depreciation has a higher credit balance for financial reporting than tax reporting, the template considers its basis for financial reporting to be lower than its basis for tax reporting (because negative numbers become lower as their absolute values increase). Similarly, the template considers a liability contract account with a higher debit balance for financial reporting than tax reporting to have a financial basis that is lower than its tax basis. Space is provided to enter the amount of any taxable or temporary differences resulting from tax positions (or portions thereof) that fail either the FASB ASC 740 MLTN recognition or measurement criterion. Do not enter the liability for unrecognized tax benefits, but rather the amount of the underlying tax basis adjustments. Permanent differences The term "permanent difference" refers to amounts that have no tax consequences, such as nondeductible expenses. Amounts entered in this section are used in the current tax calculation to adjust financial statement pretax income (loss) to taxable income (or tax loss). Amounts and expiration dates of loss carryforwards Enter loss carryforwards for tax purposes that were available at the beginning of the year, loss carryforwards generated or used during the current year, and the expiration dates of any loss carryforwards available at the end of the year. Note that the template automatically enters any operating loss generated in the current year based on amounts calculated on the Current Tax Provision worksheet. If the calculated amount is incorrect, simply override it by entering the correct amount in the cell. The Amount Used in Current Year column should include all losses used in the current year, regardless of whether they were generated in the current period and carried back to offset income of prior years or created in a prior period and used to offset current-period income. Otherwise, current amounts and deferred tax provision amounts may not compute properly. Space is provided near the bottom of this section to enter the amount of any loss carryforwards, if any, resulting from tax positions (or portions thereof) that fail either the FASB ASC 740 MLTN recognition or measurement criterion. Amounts should be entered as a negative number. Also, remember to enter an amount in the cell titled "Carryforwards expected to be used next year," which appears at the bottom of the section. This amount is needed to determine how much of the carryforwards result in current and noncurrent deferred tax assets. Amounts and expiration dates of tax credit carryforwards Enter any tax credit carryforwards available at the beginning of the year, tax credit carryforwards generated or used during the current year, and the expiration dates of any tax credit carryforwards available at the end of the year. Space is provided near the bottom of this section to enter the amount of any tax credit carryforwards, if any, resulting from tax positions (or portions thereof) that fail either the FASB ASC 740 MLTN recognition or measurement criterion. Amounts should be entered as a negative number. Remember to enter an amount in the cell titled "Carryforwards expected to be used next year." That amount is used to determine how much of the carryforwards result in current deferred tax assets. End of year deferred tax asset valuation allowance

109 CURRENT AND DEFERRED INCOME TAXES After all other information has been entered on the Input worksheet, select the Deferred Tax Provision worksheet, view the calculated deferred tax asset, and assess the likelihood of its realization. If the probability of realizing the deferred tax asset is 50 percent or less, enter the amount of the deferred tax asset that is not likely to be realized on the Input worksheet. Analysis of income taxes receivable (payable) Amounts entered in the Adjustment of Beginning of Year Amount column are included in the current tax provision calculation as an adjustment of current income tax expense or benefit. The remaining information in this section is included to provide a record of the activity in the income tax receivable (payable) account. Enter beginning of the year amounts, refunds received, payments made, adjustments of beginning of year amounts (for example, as a result of settlements with the IRS), and the current period benefit or expense. (Note that debits in this section should be entered as positive numbers and credits should be entered as negative numbers.) Completing the Calculations After completing the Input worksheet, click the Update calculations button to compute the current and deferred provisions. Calculating State Income Taxes While the template has been designed primarily to compute federal current and deferred tax provisions, it can also be used to compute tax provisions for other jurisdictions. If temporary differences and carryforwards are the same for all jurisdictions, simply enter a combined tax rate, adjusted to reflect the interaction of taxes deductible for federal income tax reporting, in the Expected Future Tax Rate cell of the Input worksheet. The adjusted combined rate can be determined by the following formula: combined rate = [federal tax rate (100% _ state tax rate)] + state tax rate If temporary differences or carryforwards are not the same for all jurisdictions, however, a combined rate should not be used. Instead, complete the template separately for each jurisdiction. The current period expense or benefit amount calculated automatically on the Current Tax Provision worksheet is based on current federal tax rates. Consequently, if the template is used to compute state or local income taxes, the current expense or benefit amount will need to be computed manually and entered in the "Taxes on current period income based on federal tax rate schedule" cell of the Current Tax Provision worksheet. Note: It is not necessary to change the current benefit (expense) amount appearing on the Analysis of Income Taxes Receivable (Payable) section of the Input worksheet. That amount is derived from the amount that appears on the Current Tax Provision worksheet

110 WELCOME TO PPC'S 1120S WORKPAPERS Welcome to PPC's 1120S Workpapers This Help provides information on using PPC's 1120S Workpapers. To view a specific topic, simply click the topic name in the navigation pane of the Help viewer. Special Note for Printing PPC Workpapers use the same basic features as Microsoft Excel for working within Workpaper templates. To print a workbook, left-click the Office button and select Print. On the Print dialog screen, you can adjust variables such as selecting a printer, paper size, and print quality. Use the following steps for an efficient way to ensure that the proper print range is selected: 1. Select the View tab. 2. Click Page Break Preview in the Workbook Views section at the top left of the screen. 3. Select the area to print by dragging and dropping the dark blue lines to define the print range. Dotted lines indicate page breaks and can be adjusted in the same manner. Pass the cursor over the lines until a double arrow appears. Left-click and drag the line to the point you want. 4. Review the information shown to ensure you have highlighted the correct print range. 5. Left-click the Office button and select Print. Note: To return to the worksheet, select Normal in the Workbook Views section