1. Olive Corporation was formed and began operations on January 1, 2018. The corporations income statement for the year and the balance sheet at year-end are presented below.

The corporation made estimated tax payments of $5,000 and the corporations book federal income tax expense is equal to the federal tax liability. Complete Form 1120 for Olive Corporation.

2. Assume that Olive Corporation, in Comprehensive Problem 1, is an S corporation owned 50 percent by Linda Holiday and 50 percent by Ralph Winston. The corporation is not subject to any special taxes. Using the relevant information given in Comprehensive Problem 1 and assuming the corporations retained earnings are $33,000 instead of $28,800, accounts payable are $2,000 instead of $6,200, and no estimated tax payments are made, complete Form 1120S for Olive Corporation and Schedule K-1 for Linda. Assume there were no cash distributions during the year.

The Olive Corporation Income Statement for the Year Ended December 31, 2018 Gross income from operations $ 270,000 Qualified dividends received from a 35 percent- owned domestic corporation 20,000 Total gross income $ 290,000 Cost of goods sold (110,000) Total income $ 180,000 Other expenses: Compensation of officers $77,000 Salaries and wages 30,000 Bad debts (direct charge-offs) 9,000 Repairs 3,000 Depreciation for book and tax purposes 10,000 Advertising 2,000 Payroll taxes 16,000 Total other expenses (147,000 Net income (before federal income tax expense) $ 33,000 The Olive Corporation Balance Sheet as of December 31, 2018 Assets: Cash $ 30,000 Accounts receivable 20,000 Inventory (at cost) 70,000 Equipment 90,000 Less: accumulated depreciation (10,000) Total assets $200,000 Liabilities and owners' equity: Accounts payable $ 6,200 Note payable (due in 10 years) 85,000 Common stock 80,000 Retained earnings 28,800 Total liabilities and owners' equity $200,000 The Olive Corporation Income Statement for the Year Ended December 31, 2018 Gross income from operations $ 270,000 Qualified dividends received from a 35 percent- owned domestic corporation 20,000 Total gross income $ 290,000 Cost of goods sold (110,000) Total income $ 180,000 Other expenses: Compensation of officers $77,000 Salaries and wages 30,000 Bad debts (direct charge-offs) 9,000 Repairs 3,000 Depreciation for book and tax purposes 10,000 Advertising 2,000 Payroll taxes 16,000 Total other expenses (147,000 Net income (before federal income tax expense) $ 33,000 The Olive Corporation Balance Sheet as of December 31, 2018 Assets: Cash $ 30,000 Accounts receivable 20,000 Inventory (at cost) 70,000 Equipment 90,000 Less: accumulated depreciation (10,000) Total assets $200,000 Liabilities and owners' equity: Accounts payable $ 6,200 Note payable (due in 10 years) 85,000 Common stock 80,000 Retained earnings 28,800 Total liabilities and owners' equity $200,000