Reference no: EM13688916

Tax Return Problem 14-110: KJJ Corp. was formed on October 10, 1997 by Kimberly Jen (123-45-6789), Jennifer James (234-56-7890) and James Kim (345-067-8901). It is a hardware store and it is located at 175 Clerk Road, Newtown, OH 45105. KJJ's employer identification number is 10-1010101 and its business code is 444130. KJJ's telephone number is (513) 525-1234 and its email address is [email protected]. KJJ Corp. uses the calendar year and the accrual basis. It uses straight-line depreciation for tax and book purposes and FIFO and lower-of-cost-or-market for inventory purposes. Kimberly, Jennifer, and James each receive 200 shares of KJJ Corp.'s common stock on October 10, 1997. No other stock has been issued or is outstanding. Each is a fulltime employee of the firm and each is paid $200,000. KJJ Corp. mad a $105,000 ($35,000 to each owner) cash distribution in 2011. During 2011, KJJ Corp. made estimated federal tax payments of $55,000 each quarter. Financial information for 2011 follows: Income Statement Income Sales $5,400,000 Sales returns and allowances 20,000 Net Sales $5,380,000 Cost of goods sold 3,120,000 Gross profit 2,260,000 Interest income Corporate bonds $20,000 State bonds 60,000 80,000 Dividend income 100,000 Total income $2,440,000 Expenses Salaries-Officers $600,000 Salaries and wages- Other 510,000 Life insurance premiums on three owners/officers KJJ Corp. is the beneficiary 20,000 Repairs and maintenance 30,000 Taxes (state, local, payroll) 249,000 Interest expense Loans to acquire state bonds $25,000 Other 47,000 72,000 Advertising 36,000 Charitable contributions 25,000 Depreciation 120,000 Employee benefits program 63,000 Total expenses 1,725,000 Net income before taxes $715,000 Federal income taxes (214,200) Net income per books $500,800 Balance Sheet 12/31/10 12/31/11 Assets: Cash $400,000 $550,000 Trade and accounts receivables 600,000 623,000 Inventories 1,500,000 1,330,000 Corporate bonds 250,000 260,000 State bonds 800,000 851,000 Stock (<20% owned, domestic corporations) 900,000 1,000,000 Prepaid federal income taxes 0 5,800 Property, plant, and equipment 3,000,000 3,030,000 Accumulated depreciation (1,100,000) (1,220,000) Land 50,000 50,000 Other assets 6,000 3,000 Total assets $6,406,000 $6,482,800 Liabilities and Owner's Equity Accounts payable $301,000 $257,000 Other current liabilities 405,000 430,000 Mortgages 1,500,000 1,200,000 Capital stock 3,000,000 3,000,000 Retained earnings 1,200,000 1,595,800 Total liabilities and owner's equity $6,406,000 $6,482,800 Prepare KJJ Corp's Form 1120 and related schedules - Schedules A, C, E, J, K, L, M-1, and M-2. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information). Go to www.irs.gov and download the necessary forms