Prepare a form 1120 for pet kingdom for tax year

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Reference no: EM131795965

Assignment: Comprehensive Tax Retur

C CORPORATION (FORM 1120)

On November 1, 2006, Janet Morton and Kim Wang formed Pet Kingdom, Inc., to sell pets and pet supplies. Pertinent information regarding Pet Kingdom is summarized as follows:

• Pet Kingdom's business address is 1010 Northwest Parkway, Dallas, TX 75225; its telephone number is (214) 555-2211.

• The employer identification number is 11-1111111, and the principal business activity code is 453910.

• Janet and Kim each own 50% of the common stock; Janet is president and Kim is vice president of the company. No other class of stock is authorized.

• Both Janet and Kim are full-time employees of Pet Kingdom. Janet's Social Secu-
rity number is 123-45-6789, and Kim's Social Security number is 987-65-4321.

• Pet Kingdom is an accrual method, calendar year taxpayer. Inventories are deter-mirsing FIFO and the lower of cost or market method. Pet Kingdom uses the strafgElline method of depreciation for hook purposes and accelerated deprecia-tion (MACRS) for tax purposes.

• During 2015, the corporation distributed cash dividends of $250,000.

Pet Kingdom's financial statements for 2015 are shown below.

Income Statement

Income

 

 

 

Gross sales

 

 

$ 5,750,000

Sales returns and allowances

 

 

(200,000)

Net sales

 

 

$ 5,550,000

Cost of goods sold

 

 

(2,300,000)

Gross profit

 

 

$ 3,250,000

Dividends received from stock investments in less-than-20%­owned U.S. corporations

 

 

43,750

Interest income:

 

 

 

State bonds

$ 15,000

 

 

Certificates of deposit

20,000

 

35,000

Total income

 

 

$ 3,328,750

Expenses

 

 

 

Salaries-officers

 

 

 

Janet Morton

$262,500

 

 

Kim Wong

262,500

$525,000

 

Salaries-clerical and sales

 

725,000

 

Taxes (state, local, and payroll)

 

238,000

 

Repairs and maintenance

 

140,000

 

Interest expense:

 

 

 

Loan to purchase state bonds

$ 9,000

 

 

Other business loans

207,000

216,000

 

Advertising

 

58,000

 

Rental expense

 

109,000

 

Depreciation*

 

106,000

 

Charitable contributions

 

38,000

 

Employee benefit programs

 

60,000

 

Premiums on term life insurance policies on lives of Janet Morton and

 

 

 

Kim Wong; Pet Kingdom is the designated beneficiary

 

40,000

 

Total expenses

 

 

(2,255,000)

Net income before taxes

 

 

$ 1,073,750

Federal income tax

 

 

(356,023)

Net income per books

 

 

$ 717,727

* Depreciation for tax purposes is 5136,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). If you solve this problem using H&R BLOCK Tax Software, enter the amount of depreciation on line 20 of Form 1120.

Balance Sheet

Assets

January 1, 2015

December 31, 2015

Cash

$ 1,200,000

$ 1,037,750

Trade notes and accounts receivable

2,062,500

2,147,000

Inventories

2,750,000

3,030,000

Stock investment

1,125,000

1,125,000

State bonds

375,000

375,000

Certificates of deposit

400,000

400,000

Prepaid Federal tax

-0-

3,977

Buildings and other depreciable assets

5,455,000

5,455,000

Accumulated depreciation

(606,000)

(712,000)

Land

812,500

812,500

Other assets

140,000

128,500

Total assets

$13,714,000

$13,802,727

Liabilities and Equity

January 1, 2015

December 31, 2015

Accounts payable

$ 2,284,000

$ 1,975,000

Other current liabilities

175,000

155,000

Mortgages

4,625,000

4,575,000

Capital stock

2,500,000

2,500,000

Retained earnings

4,130,000

4,597,727

Total liabilities and equity

$13,714,000

$13,802,727

During 2015, Pet Kingdom made estimated tax payments of $90,000 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2015. Suggested software: H&R BLOCK Tax Software.

Reference no: EM131795965

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