Reference no: EM131795981
Assignment: Comprehensive Tax Return
C CORPORATION (FORM 1120)
On February 12, 2003, Nancy Trout and Delores Lake formed Kingfisher Corporation to sell fishing tackle. Pertinent information regarding Kingfisher is summarized as follows:
• Kingfisher's business address is 1717 Main Street, Ely, MN 55731; its telephone number is (218) 555-2211.
• The employer identification number is 11-1111111, and the principal business activity code is 451110.
• Nancy owns 50% of the common stock and is president of the company, and Delores owns 50% of the common stock and is vice president of the company. No other class of stock is authorized.
• Both Nancy and Delores are full-time employees of Kingfisher. Nancy's Social Se-curity number is 123-45-6789, and Delores's Social Security number is 987-65-4321.
• Kingfisher is an accrual method, calendar year taxpayer. Inventories are deter¬mined using FIFO and the lower of cost or market method. Kingfisher uses the straight-line method of deprecation for book purposes and accelerated deprecia¬tion (MACRS) for tax purposes.
• During 2015, the corporation distributed cash dividends of $80,000.
Kingfisher's financial statements for 2015 are shown below. Income Statement
|
Income
|
|
|
|
Gross sales
|
|
|
$2,408,000
|
Sales returns and allowances
|
|
|
(80,000)
|
Net sales
|
|
|
$2,328,000
|
Cost of goods sold
|
|
|
(920,000)
|
Gross profit
|
|
|
$1,408,000
|
Dividends received from stock investments in less-than-20%-owned
|
|
|
|
U.S. corporations
|
|
|
12,000
|
Interest income
|
|
|
|
State bonds
|
$ 14,000
|
|
|
Certificates of deposit
|
10,000
|
|
24,000
|
Total income
|
|
|
$1,444,000
|
Expenses
|
|
|
|
Salaries-officers
|
|
|
|
Nancy Trout
|
$160,000
|
|
|
Delores Lake
|
160,000
|
$320,000
|
|
Salaries-clerical and sales
|
|
290,000
|
|
Taxes (state, local, and payroll)
|
|
85,000
|
|
Repairs and maintenance
|
|
56,000
|
|
Interest expense:
|
|
|
|
Business loans
|
$ 12,000
|
|
|
Loan to purchase state bonds
|
8,000
|
20,000
|
|
Advertising
|
|
6,000
|
|
Rental expense
|
|
68,000
|
|
Depreciation*
|
|
40,000
|
|
Charitable contributions
|
|
15,000
|
|
Employee benefit programs
|
|
24,000
|
|
Premiums on term life insurance policies on lives of Nancy Trout and Delores
|
|
|
|
Lake; Kingfisher is the designated beneficiary
|
|
16,000
|
|
Total expenses
|
|
|
(940,000)
|
Net income before taxes
|
|
|
$ 504,000
|
Federal income tax
|
|
|
(171,904)
|
Net income per books
|
|
|
$ 332,096
|
*You are not provided enough detailed information to complete a Form 4562 (depreciation). If you solve this problem using H&R BLOCK Tax Software, enter the amount of deprecation on fine 20 of Form 1120.
Assets
|
January 1, 2015
|
December 31, 2015
|
Cash
|
$ 380,000
|
$ 335,524
|
Trade notes and accounts receivable
|
308,400
|
480,280
|
Inventories
|
900,000
|
1,012,000
|
State bonds
|
160,000
|
160,000
|
Federal income tax refund
|
-0-
|
3,096
|
Certificates of deposit
|
140,000
|
140,000
|
Stock investments
|
300,000
|
300,000
|
Building and other depreciable assets
|
240,000
|
240,000
|
Accumulated depreciation
|
(88,800)
|
(128,800)
|
Land
|
20,000
|
20,000
|
Other assets
|
3,600
|
2,000
|
Total assets
|
$2,363,200
|
$2,564,100
|
Liabilities and Equity
|
January 1, 2015
|
December 31, 2015
|
Accounts payable
|
$ 300,000
|
$ 299,104
|
Other current liabilities
|
80,300
|
40,000
|
Mortgages
|
210,000
|
200,000
|
Capital stock
|
500,000
|
500,000
|
Retained earnings
|
1,272,900
|
1,524,996
|
Total liabilities and equity
|
$2,363,200
|
$2,564,100
|
During 2015, Kingfisher made estimated tax payments of $43,750 each quarter to the IRS. Prepare a Form 1120 for Kingfisher for tax year 2015. Suggested software: H&R BLOCK Tax Software.