• 

During 2012, Pet Kingdom made estimated tax payments of $107,000 each quarter to

the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2012. Suggested software:

H&R BLOCK At Home.

2. On February 12, 2002, 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; and its e-mail address is kingfisher@kf.com.

• 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 Security 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 determined

using FIFO and the lower of cost or market method. Kingfisher uses the straight-line

method of deprecation for book purposes and accelerated depreciation (MACRS)

for tax purposes.

• During 2012, the corporation distributed cash dividends of $64,000.

Kingfisher’s financial statements for 2012 are shown below.

Income Statement

Income

Gross sales

$1,884,000

Sales returns and allowances (64,000)

Net sales

$1,820,000

Cost of goods sold

(736,000)

Income

Gross profit

Dividends received from stock

investments in less-than-20%-owned

U.S. corporations

Interest income

State bonds

$2,500

Certificates of deposit

4,000

Total income

Expenses

Salaries—officers

Nancy Trout

Delores Lake

Salaries—clerical and sales

Taxes (state, local, and payroll)

Repairs and maintenance

Interest expense:

$150,000

150,000

$1,084,000

9,000

6,500

$1,099,500

$300,000

232,000

68,000

45,000

Business loans

$10,000

Loan to purchase state bonds

1,800

11,800

Advertising

5,000

Rental expense

38,000

Depreciation*

32,000

Charitable contributions

12,000

Employee benefit programs

19,000

Premiums on term life insurance policies

on lives of Nancy Trout and Delores

Lake; Kingfisher is the designated

beneficiary

12,800

Legal and accounting services

16,000

Total expenses

(791,600)

Net income before taxes

$ 307,900

Federal income tax

(105,593)

Net income per books

$ 202,307

* You are not provided enough detailed information to complete a Form 4562 (depreciation). If

you solve

this problem using H&R BLOCK At Home, enter the amount of deprecation on line 20 of Form

1120.

Balance Sheet

Assets

January 1, 2012 December 31, 2012

Cash

$384,000

$287,780

Trade notes and accounts receivable 547,000

668,000

Inventories

480,000

569,600

State bonds

60,000

60,000

Federal income tax refund

–0–

2,407

Certificates of deposit

80,000

80,000

Stock investments

100,000

100,000

Building and other depreciable assets 192,000

192,000

Accumulated depreciation

(71,040)

(103,040)

Land

116,000

116,000

Other assets

2,880

1,600

Total assets

$1,890,840

$1,974,347

Liabilities and Equity

Accounts payable

Other current liabilities

Mortgages

Capital stock

Retained earnings

Total liabilities and equity

January 1, 2012 December 31, 2012

$240,000

$220,440

64,240

32,000

168,000

165,000

400,000

400,000

1,018,600

1,156,907

$1,890,840

$1,974,347

During 2012, Kingfisher made estimated tax payments of $27,000 each quarter to the

IRS. Prepare a Form 1120 for Kingfisher for tax year 2012. Suggested software: H&R