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 k..r@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 $1,084,000
Dividends received from stock investments in less-than-20%-owned
U.S. corporations 9,000
Interest income
State bonds $ 2,500
Certificates of deposit 4,000 6,500
Total income $1,099,500
Expenses
Salaries-officers
Nancy Trout $150,000
Delores Lake 150,000 $300,000
Salaries-clerical and sales 232,000
Taxes (state, local, and payroll) 68,000
Repairs and maintenance 45,000
Interest expense:
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
Assets January 1, 2012 December 31, 2012
Liabilities and Equity January 1, 2012 December 31, 2012
Accounts payable $ 240,000 $ 220,440
Other current liabilities 64,240 32,000
Mortgages 168,000 165,000
Capital stock 400,000 400,000
Retained earnings 1,018,600 1,156,907
Total liabilities and equity $1,890,840 $1,974,347
During 2012, Kingfisher made estimated tax payments of $27,000 each quarter to the
IRS.