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taxation Business project 1 Due date Worth 75 points You MUST document any / all assumptions made. Although the use of software is permitted, I encourage you to attempt the project without the use tax preparation of software first 03/07/11 Prepare a Form 1120 for the 2010 tax year 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, Cleveland, Ohio 44111 its telephone number is 216-999-5555; and its email address is petkingdom@pki.com The employer identification number is 11-1111111, and its principal business activity code is 453910 Janet and Kim each own 50% of the common stock; Janet is President and Kim vice-president of the company. No other class of stock is authorized Both Janet and Kim are fulltime 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'Sis aan accural method, calendar year taxpayer. Inventories are determined using the FIFO method and the lower of cost or market method. Pet Kingdom uses the straigh line method of depreciation for book purposes and MACRS for tax purposes. During 2010, the corporation distributed cash dividends of $200,000 Pet Kingdom's financial statements for 2010 are as follows: Income Statement Income Gross Sales Sale Returns and Allowances Net Sales Cost of Goods Sold Gross Profit Dividends received from stock investments in less than 20% owned US corporations Interest Income State Bonds Certificate of Deposit Total Income $ 12,000 16,000 $ 28,000 2,663,000 $ 4,950,000 4,740,000 210,000 (2,140,000) 2,600,000 $ 4,600,000 (160,00 0) 4,440,0 00 (1,840,00 0) 2,600,0 00 35,000 Expenses Salaries Officiers Janet Morton Kim Wong Salaries Clerical and sales Taxes (state, local and payroll) Repairs and Maintenance Interest Expense Loan to purchase state bonds other business loans Advertising Rent Expense Depreciation * $ 7,000 174,000 181,000 46,000 86,000 80,000 $ 210,000 210,000 $ 420,000 580,000 190,000 112,000 Charitable contributions Employee benefit programs Premiums on term life insurance policies on Lives of Janet and Kim; Pet Kingdom is the designated beneficiary Total Expenses Net income before taxes Federal Income taxes Net Income per Books * Depreciation for tax purposes is $110,000. You are not given enough information to complete Form 4562. Use the information given as factual. Balance Sheet Assets Cash Trade notes and Accounts Receivable Inventories Stock Investments State Bonds Certificate of Deposits Prepaid Federal Taxes Building and other Depreciable assets Accumulated Depreciation Land January 1, 2010 $960,000 1,650,000 2,200,000 900,000 300,000 350,000 0 30,000 48,000 32,000 $ (1,805,000) $ 858,000 (282,370) $ 575,630 12/31/2010 $680,000 1,838,000 2,424,000 900,000 300,000 350,000 3,630 4,365,000 (485,000) 650,000 4,365,000 (565,000) 650,000 Other Assets 112,000 $11,002,000 102,800 $11,048,430 Liabilities and Equity Accounts Payable Other Current Liabilities Mortgages Capital Stock Retained Earnings $ 1,850,000 142,000 3,700,000 2,000,000 3,310,000 $ 1,579,800 123,000 3,660,000 2,000,000 3,685,630 $ During 2010 Pet Kingdom made estimated tax payments of $71,500 each quarter 11,002,000 $ 11,048,430 ... View Full Document

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