Entering Form 1125-A, Cost of Goods Sold in Lacerte

1. Go to Screen 14, Cost of Goods Sold.
2. Under the Cost of Goods Sold section, enter any applicable information.
   • The amounts entered will flow to Form 1120, page 6, line 3.
3. Under the Inventory Information (Form 1125-A) section, enter any applicable information.

1. Go to Screen 11, Cost of Goods Sold (1125-A).
2. Under the Cost of Goods Sold (1125-A) section, enter any applicable information.
   • The amounts entered will flow to Form 1065, page 5, line 6.
3. Under the Inventory Information section, enter any applicable information.

1. Go to Screen 14, Cost of Goods Sold (1125-A).
2. Under the Cost of Goods Sold (1125-A) section, enter any applicable information.
   • The amounts entered will flow to Form 1120-S, page 4, line 3.
3. Under the Inventory Information section, enter any applicable information.

You should only enter the beginning and ending inventory for a balance sheet if they're different from the beginning and ending inventory entries for the cost of goods sold. Select your module below for instructions.

The Cost of Goods Sold (COGS) shows up on Form 1120, line 2 as a negative amount and is added to the income instead of subtracted from it. Here's why:

If you look at the Form 1125-A for the COGS calculation, you'll see that line 7, Inventory at end of year, is greater than line 6, Total. When you add lines 1 through 5, the result is a negative amount on line 8, which is then transferred to Form 1120, line 2.

On Form 1120, line 2 is subtracted from Line 1e. Since line 2 is negative and being subtracted, it's added to Line 1e and a gain is recognized for the difference between the costs incurred and the value of the inventory.

Form 8916-A, Supplemental Attachment to Schedule M-3, is required when cost of goods sold, interest income, or interest expense is included on the return. You have to enter it manually. Refer to this article for information on generating Form 8916-A in the program.

To include current year depreciation as part of COGS:

1. Go to the Screen 14, Depreciation.
2. In the field Form (Ctrl+T), select 2=Form 1125-A, Cost of Goods Sold.
3. Leave the field Activity name or number (input code 19) blank.

This tells Lacerte that any current year depreciation for the selected assets should be included on Form 1125-A.

Note: Screen 11, Cost of Goods Sold has a Depreciation [O] (input code 106) field.  An amount entered in this field overrides the assets assigned to the 1125-A via the Depreciation screen and the Direct Input screen and carries the amount entered to Form 1125-A and to Form 1065, page 1, line 16b, but does not carry the amount to the Schedule L - you must also make an entry in Current Year Book Depreciation in Screen 25, Balance Sheet Miscellaneous.  You must also manually prepare an attach Form 4562 for amounts entered in the Screen 11 override.