USA Form 1125-A Inventoriable Costs

[SB_Asset]

I am looking at an IRS Form 1125-A that is part of a form 1120. It looks something like this:

box1 = PY EB (for the sake of putting a number here lets go with $3,400
box2 = 0 ( I know there were no new purchases)
box3 = 666
box4 = blank (N/A)
box5 = 2,700
box6 = 6,766
box7 = 3,400
box8 = 3,366 (6,766-3400=3,366)

This would ordinarily be right, but I happen to know for a fact that this company did not have any sales for the year. It seems to me that the current year costs should have been added to inventory, and since there were no sales for the year the amount in box 7 should match the amount in box 6, and box 8 should have been reported at $0. I spent some time searching the IRS Pubs on this and haven't found anything to validate the position that the accountant responsible for completing this form took. If anyone has some insight into when current year costs do not get added to inventory I would appreciate the insight.

Thanks.

 

[smallbushelp]

Well, if there was no product sold during the fiscal year, then I would agree with you that there would be no COGS expense. But it would seem that by entering amounts on lines 2, 3, 4 or 5, the accountant is reporting current year costs in inventory. The discrepancy is in reporting inventory at the end of the year as something less than the total shown on line 6. Unless the business is reporting something else like shrinkage or bartering or use of inventory by the business maybe?

Is this a manufacturing or retail sales business? Most other types of businesses that either don't produce or sell merchandise really don't need to use Form 1125-A.