PET KINGDOM corporate tax return project 2016 - ACCT 421A...

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ACCT 421A AND ACCT 521A CORPORATE TAXATION: CORPORATE FEDERAL INCOME TAX RETURN PROJECT INSTRUCTIONS: You can work with one other person on the project and submit one project with both of your names on it. Based on the facts below, prepare a federal corporate income tax return, called a Form 1120, for Pet Kingdom Inc. (Pet Kingdom or Corporation). Do NOT prepare individual tax returns for Pet Kingdom’s shareholders, Janet and Kim Wong. Even though I would recommend you use the H&R Block software that comes with the textbook, it is up to you which software program you want to use to prepare the tax return project. If you have any technical questions about or issues with the H&R Block software that comes with the textbook, call the phone number listed in the textbook for H&R Block technical support. FOR PURPOSES OF THIS TAX PROJECT A SCHEDULE M-3, NOT SCHEDULE M-1, MUST BE COMPLETED. IF THE SOFTWARE AUTOMATICALLY SELECTS THAT A SCHEDULE M-1 IS TO BE COMPLETED, SELECT THAT A SCHEDULE M-3 IS TO BE COMPLETED. SEE DISCUSSION BELOW AND SLIDES FOR THE CORPORATIONS IN DEPTH LECTURE ON MOODLE ABOUT SCHEDULE M-1s and SCHEDULE M-3s. FACTS: I. GENERAL INFORMATION ABOUT PET KINGDOM INC: a. On November 1, 2005, Janet Morton and Kim Wong formed Pet Kingdom Inc. to sell pets supplies. b. Pet Kingdom has 200 shares of issued and outstanding common stock, which is its only class of stock c. Janet and Kim: i. each own 50% of Pet Kingdom’s 200 shares of common stock ii. Janet is paid by Pet Kingdom for serving as its president. Her Social Security number is 123-45-6789; iii. Kim is paid by Pet Kingdom for serving as its vice-president. His Social Security number is 987-65-4321. d. Pet Kingdom’s: i. Business address: 1010 Northwest Parkway, Dallas, TX 75225; ii. Telephone number: (214) 555-2211; iii. Employer identification number (EIN): 11-2222222 iv. Principal business activity code: 453910. 1
e. Pet Kingdom is an accrual method and calendar year taxpayer. f. Pet Kingdom’s inventory is determined using first in, first out (FIFO) and the lower of cost or market method. g. Pet Kingdom uses the straight-line-method of depreciation for book purposes and accelerated depreciation method (MACRS) for tax purposes. II. PET KINGDOM’S INCOME: a. $5,750,000 in gross sales from selling pet supplies and $3,250,000 in gross profit ($5,750,000 gross sales LESS $200,000 sales returns and allowances LESS $2,300,000 cost of goods sold); b. Because Pet Kingdom owns 20% of the shares in Doggie Grooming Inc. and received a dividend distribution of $43,700 from Doggie Grooming; c.

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