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.
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Kingfisher's financial statements for 2015 are shown below.
Income Statement
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Income
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Gross sales
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$2,408,000
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Sales returns and allowances
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(80,000)
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Net sales
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$2,328,000
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Cost of goods sold
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(920,000)
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Gross profit
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$1,408,000
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Dividends received from stock investments in less-than-20%-owned
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U.S. corporations
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12,000
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Interest income
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State bonds
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$ 14,000
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Certificates of deposit
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10,000
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24,000
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Total income
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$1,444,000
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Expenses
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Salaries-officers
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Nancy Trout
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$160,000
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Delores Lake
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160,000
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$320,000
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Salaries-clerical and sales
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290,000
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Taxes (state, local, and payroll)
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85,000
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Repairs and maintenance
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56,000
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Interest expense:
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Business loans
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$ 12,000
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Loan to purchase state bonds
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8,000
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20,000
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Advertising
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6,000
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Rental expense
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68,000
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Depreciation*
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40,000
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Charitable contributions
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15,000
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Employee benefit programs
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24,000
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Premiums on term life insurance policies on lives of Nancy Trout and Delores
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Lake; Kingfisher is the designated beneficiary
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16,000
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Total expenses
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(940,000)
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Net income before taxes
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$ 504,000
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Federal income tax
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(171,904)
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Net income per books
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$ 332,096
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*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.
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Assets
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January 1, 2015
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December 31, 2015
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Cash
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$ 380,000
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$ 335,524
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Trade notes and accounts receivable
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308,400
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480,280
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Inventories
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900,000
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1,012,000
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State bonds
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160,000
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160,000
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Federal income tax refund
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-0-
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3,096
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Certificates of deposit
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140,000
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140,000
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Stock investments
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300,000
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300,000
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Building and other depreciable assets
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240,000
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240,000
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Accumulated depreciation
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(88,800)
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(128,800)
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Land
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20,000
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20,000
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Other assets
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3,600
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2,000
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Total assets
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$2,363,200
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$2,564,100
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Liabilities and Equity
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January 1, 2015
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December 31, 2015
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Accounts payable
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$ 300,000
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$ 299,104
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Other current liabilities
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80,300
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40,000
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Mortgages
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210,000
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200,000
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Capital stock
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500,000
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500,000
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Retained earnings
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1,272,900
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1,524,996
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Total liabilities and equity
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$2,363,200
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$2,564,100
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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.