C Corporation Tax Return Banner, Inc. (a C corporation) is located at 90 Fifth Avenue, New York City, NY. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of self- protection gear. Its employer identification number (EIN) is 12-12345687. The company was incorporated on January 1, 1941 and began business on April 1, 1941. Banner, Inc. made the following estimated tax payments for 2017: April 15, 2017 $100,000 June 15, 2017 200,000 September 15, 2017 235,000 December 15, 2017 235,000 Total $770,000 Taxable income in 2016 was $1.4 million and the 2016 tax was $476,000. The corporation earned its 2017 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods. Inventory and Cost of Goods Sold: The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected on the appropriate form. No other costs or expenses are allocated to cost of goods sold. The corporation is exempt from the uniform capitalization (UNICAP) rules because average gross income for the previous three years was less than $10 million. The following information should also be included on the applicable form: Line 9 (a) Check (ii) (b),(c), & (d) Not applicable (e) & (f) No Compensation of Officers: Officer Social Security # % Time Devoted % of Stock Owned Amount of to Business Compensation Diana Banner 123-45-6789 100 50 $ 246,500 Peter Bruce 987-65-4321 100 25 153,000 Wayne Prince 123-98-4567 100 25 153,000On October 16, 2017 the corporation sold Equipment 1 for $230,000. The corporation had no Sec. 1231 losses from prior years. In a separate transaction on October 17, 2017 the corporation acquired and placed in service a piece of equipment costing $ 500,000. Assume these transactions do not qualify as like-kind exchange. The new equipment is seven-year property. The corporation made the Sec. 179 expensing election for the entire cost of the property. Use published IRS depreciation tables to compute the 2017 depreciation. The balance sheet is follows: January 1, 2017 December 31, 2017 Account Debit Credit Debit Credit Cash $ 469,491 $ $ 953,648 Accounts Receivable 340,000 425,000 Allowance for doubtful accounts 17,000 21,250 Inventory 2,125,000 2,975,000 Investment in corporate stock 262,000 50,000 Investment in municpal bonds 30,000 30,000 Cash surrender value of insurance 60,000 80,000 policy Land 300,000 300,000 Buildings 1,000,000 1,000,000 Accumulated Depreciation - 50,000 70,000 Buildings Equipment 600,000 900,000 Accumulated Depreciation - 150,000 165,000 Equipment Trucks 100,000 100,000 Accumulated Depreciation - Trucks 30,000 50,000 Accounts payable 300,000 270,000 Notes payable (short-term) 700,000 560,000 Accrued payroll taxes 12,648 15,810 Accrued state income taxes 3,825 6,375 Accrued federal income taxes 2,125 103,943 Bonds payble (long-term) 1,400,000 900,000 Net deferred tax liability 70,893 134,719 Capital stock - common 850,000 850,000 Retained earnings -unappropriated 1,700,000 3,666,551 Total $ 5,286,491 $ 5,286,491 $ 6,813,648 $ 6,813,648The corporation is not entitled to any credits. Ignore the financial statement impact of any underpayment penalties incurred on the tax return. Required: Prepare the 2017 corporate tax return for Banner, Inc. along with any necessary supporting schedules, forms, etc. Prepare both the Schedule M-3 and M-1 but you may omit Schedule B and Form 8916-A. Notes: 1.) The dividends received deduction percentage in 2017 was 70% for less than 20% owned property. 2.) Omit Form 2220 and insert $4,898 penalty on Form 1120, Page 1, Line 33.Bad Debts: For tax purposes, the corporation uses the direct write-off method of deducting bad debts. For book purposes. the corporation uses an allowance for doubtful accounts. During 201?. the corporation charged $34,000 to the allowance account. such amount representing actual write-offs for 201?. Additional information for Schedule K: 1b Accrual B Do not check box 2a 451140 0 Fill in the correct amount b Ftetail Sales 10 3 c Self-Protection Gear 11 Do not check box 3 No 12 Not applicable 4a No 13-14 No b Yes. omit Schedule G 15a No 5a No b Do not check box b No 10-10 No 0-? No Capital Gains and Losses: The corporation sold 100 shares of Shield Gorp. common stock on October T. 201? for $125,000. The corporation acquired the stock on December 15, 2010 for $05,000. The corporation also sold 2'5 shares of Metro Gorp common stoolt on June 1?. 201? for $110,000. The corporation acquired this stock on September 10. 2015for $11?,000. The corporation has a $10.000 capital loss carryover from 2015. These transactions were not reported to the corporation on Form 1000-0. Fixed Assets and Depreciation: Book: The corporation uses straight-line deprecation over the useful lives of the assets as follows: store building, 50 years; equipment, ten years; and trucks. five years. The corporation takes a half- year's depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements reect these calculations. Tax: All assets are MACHS property as follows: store building, 30-year non-residential real property: equipment, seven-year property: and trucks. five-year property. The corporation acquired the store building for $1 million and placed it in services on January 2. 2014. The corporation acquired two pieces of equipment for $200.000 [Equipment 1} and $400.000 {Equipment 2} and placed them in service on January 2. 2014. The corporation acquired the trucks for $100,000 and placed them in service on July 10, 2015. The trucks are not listed property and are no subject to the limitation on luxury automobiles. The corporation did not make the expensing election under Sec. 1?0 or take bonus depreciation on any property acquired before 201?. Accumulated depreciation through December 31, 2010 on the properties is as follows: Store building $ ?5.390 Equipment 1 1 12.540 Equipment 2d 225.030 Trucks 52.000 The unaudited GAAP income statement for 2017 is as follows: Sales $ 8,500,000 Returns (212,500) Net sales $ 8,287,500 Beginning inventory $ 2,125,000 Purchases 4,675,000 Ending Inventory (2,975,000) Cost of goods sold (3,825,000) Gross profit 4,462,500 Expenses: Depreciation $ 115,000 Repairs 17,680 Insurance 46,750 Net premium-Officers' life insurance 25,500 Officers' compensation 552,500 Other salaries 340,000 Utilities 61,200 Advertising 40,800 Legal and accounting fees 42,500 Charitable contributions 25,500 Payroll taxes 52,700 Interest Expense 178,500 Bad debt expense 38,750 Total expenses $ (1,536,880) Gain on Sale of equipment 90,000 Interest on municpal bonds 4,250 Net gain on stock sales 23,000 Dividend income 10,200 Net income before income taxes $ 3,053,070 Federal income tax expense (937,769) State income tax expense (63,750) Net income $ 2,051,551 Other Information: The corporations's tax rate in 2017 was 34%. The corporation's activities do not qualify for the U.S. production activities deduction. Ignore the AMT and accumulated earnings tax. The corporation received dividends from taxable, domestic corporations, the stock of which Banner owns less than 20%. . The corporation paid $ 85,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings. . The state income tax provided earlier is the exact amount of such taxes incurred during the year