Reference no: EM133374

Question :

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 situated 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, James, and Jennifer 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 permanent 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

Purpose KJJ Corp's Form 1120 and related schedules - Schedules A, C, E, J, K, L, M-1, and M-2.