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Accounting homework help

Problem 3—C Corporation (FORM 1120)
On November 1, 2005, Janet Morton and Kim Wong 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; and its e-mail address is petkingdom@pki.com.
  • 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 Security 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 determined using FIFO and the lower of cost or market method. Pet Kingdom uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.
  • During 2018, the corporation distributed cash dividends of $306,495.

 
Pet Kingdom’s financial statements for 2019 are shown below.
 
 
Income Statement
 
Income
Gross Sales                                                                                                                                                 $4,600,000
Sales returns and allowances                                                                                                             (160,000)
Net Sales                                                                                                                                                     $4,440,000
Cost of goods sold                                                                                                                                   (1,840,000)
Gross Profit                                                                                                                                                                $2,600,000
Dividends received from stock Investments
in less-than-20%-owned U.S. corporations                                                                          35,000
Interest Income:
State bonds                                                                        $12,000
Certificates of deposit                                                  16,000                                                   28,000
Total income                                                                                                                                             $2,663,000
 
Expenses
Salaries-officers
Janet Morton                                                                     $210,000
Kim Wong                                                                           210,000 $420,000
Salaries-clerical and sales                                                                                    580,000
Taxes (state, local, and payroll)                                                                        190,000
Repairs and maintenance                                                                                    112,000
Interest Expense:
Loan to purchase state bonds                                    $ 7,000
Other business loans                                                     174,000 181,000
Advertising                                                                                                                                46,000
Rental expense                                                                                                        86,000
Depreciation*                                                                                                           80,000
Charitable contributions                                                                                      30,000
Employee benefit programs                                                                                               48,000
Premiums on term life insurance policies
on lives of Janet and Kim; Pet Kingdom
is the designated beneficiary                                                                    32,000
Total expenses                                                                                                                                         (1,805,000)
Net Income before taxes                                                                                                                     $858,000
Federal income tax                                                                                                                                 (175,875)
Net income per books                                                                                                                           $682,125
 
*Depreciation for tax purposes is $110,000. 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, 2019                                 December 31, 2019
Cash                                                                              $ 960,000                                             $ 680,000
Trade notes and accounts receivable             1,650,000                                             1,838,000
Inventories                                                                                2,200,000                                             2,424,000
Stock Investment                                                    900,000                                 900,000
State bonds                                                                                300,000                                 300,000
Certificates of deposit                                          350,000                                 350,000
Prepaid Federal Tax                                                               -0-                                                          3,630
Buildings and other depreciable assets         4,365,000                                             4,365,000
Accumulated depreciation                                  (485,000)                                             (565,000)
Land                                                                              650,000                                 650,000
Other assets                                                              112,000                                 102,800
Total assets                                                        $11,002,000                                        $11,048,430
 
Liabilities and Equity                                             January 1,2019                                  December 31, 2019
Accounts Payable                                                    $ 1,850,000                                          $ 1,579,800
Other current liabilities                                        142,000                                 123,000
Mortgages                                                                  3,700,000                                             3,660,000
Capital stock                                                              2,000,000                                             2,000,000
Retained earnings                                                   3,310,000                                             3,685,630
Total liabilities and equity                          $11,002,000                                        $ 11,048,430
 
During 2018, Pet Kingdom made estimated tax payments of $44,876.25 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2019. Suggested software: H&R BLOCK Tax Software.

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