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