$.$ Complete Fancy Pups, Inc.s $($FPI$)$ corporate tax return for $2022.$ Only the following forms are to be completed:Form $1120$: U$.$S$.$ Corporation Income Tax Return $($all six pages$)$Form $1125-$A: Cost of Goods Sold Form $4562$: Depreciation and AmortizationForm $4797$: Sales of Business PropertySchedule D: Capital Gains and LossesIf the forms ask for any information not given in the project, use reasonable assumptions to fill in the gaps. $2.$ You may complete the return individually, or you may work in a group $($no more than three people per group$).$ Groups should turn in only one return with the names of all group members included. $3.$ You must complete the tax return manually $($by hand or fillable tax forms downloaded from the irs.gov website$)$ using federal tax forms. Do not use any tax return software programs to complete this project. See the Detailed instruction video for information on how to download the fillable tax forms. Taxpayer Facts:Fiona Lake and Katie Ayers formed Fancy Pups, Inc. $($FPI$)$ in $2012.$ FPI sells $($retail$)$ dog harnesses. Fiona owns $60$ percent of the outstanding common stock of FPI and Katie owns the remaining $40$ percent.FPI is located at $711$ Ashton Drive, Buffalo. NY $14150$FPIs Employer Identification Number is $59-41381561.$FPIs business activity is retail sales of pet supplies. Its business activity code is $453910.$Officers of the corporation are as follows:oFiona is the president $($Social Security number $404-52-6682).$ oKatie is the executive vice president $($Social Security number $542-88-8972).$ All officers devote $100$ percent of their time to the business and all officers are U$.$S$.$ citizens.FPI uses the accrual method of accounting and has a calendar year$-$end.FPI made four equal federal estimated tax payments of $$43,000$ each. FPI paid a dividend of $$80,000$ to its shareholders on December $1.$ FPI had sufficient earnings and profits $($E&P$)$ to absorb the distribution. Notes: $1.$ FPIs inventory$-$related purchases during $2022$ were $$1,134,000.$ It values its inventory based on cost using the FIFO inventory cost flow method. $2.$ Of the $$10,000$ interest income, $$3,000$ was from a City of Buffalo bond issued in $2019,$ and the remaining $$7,000$ was from a money market account$\mathrm{.}3.$ FPIs dividend income came from Chewey, Inc. FPI owned $15,000$ shares of the stock in Chewey at the beginning of the year. This represented $15\%$ percent of Cheweys outstanding stock$\mathrm{.}4.$ On July $12,2022,$ FPI sold $2,500$ shares of its Sinclair stock for $$33,000.$ It had originally purchased these shares on April $24,2016,$ for $$25,000.$ After the sale, FPI owned $12\mathrm{.}5\%$ of Chewey$\mathrm{.}5.$ FPIs compensation is as follows:Officer Compensation:Fiona, $$300,000$Katie $$200,000$Employee Compensation: $$800,0006.$ FPI wrote off $$25,000$ in accounts receivable as uncollectible during the year$\mathrm{.}7.$ FPI sold equipment for $$10,000$ on May $5,2022.$ It originally purchased the equipment for $$12,000$ on February $18,2020.$ Through the date of the sale, the company had recorded a cumulative total of $$4,000$ of book depreciation on the asset. You will need to calculate the tax depreciation taken on the asset through the date of sale for purposes of calculating taxable gain. See #$13($b$)$ below for additional information. For tax purposes, the entire gain was recaptured as ordinary income under $1245\mathrm{.}8.$ FPI has a capital loss carryover to this year from last year in the amount of $$5,000\mathrm{.}9.$ Of the $$62,000$ of interest expense, $$56,000$ was from the mortgage on FPIs building and the remaining $$6,000$ of interest was from business$-$related loans$\mathrm{.}10.$ The pension expense is the same for both book and tax purposes$\mathrm{.}11.$ The amount of Other Expenses includes $$5,000$ for premiums paid on officer term life insurance policies for which FPI is the beneficiary. The policies cover the lives of Fiona and Katie. $12.$ One of FPIs officers $($Vice$-$President of Sales$)$ passed away on January $1,2022.$ FPI had a life insurance policy on the officer and collected insurance proceeds this year in the amount of $$50,000.13.$ Use the following information to calculate FPIs tax depreciation expense for $2022.$a$.$ FPI owned the following fixed assets at the beginning of $2022$:Building acquired for $$1,400,000$ and placed in service on January $1,2017.$ The property is considered $39-$year nonresidential property for tax purposes. $($For book purposes the company is depreciating the building over $50$ years using straight$-$line depreciation$).$ Several pieces of equipment acquired for $$100,000$ and placed in service on various dates during $2020.$ For tax purposes, all equipment is $5-$year property and subject to the mid$-$year convention. The company did not take Section $179$ or bonus depreciation for any of these assets. $($For book purposes the company is depreciating all the equipment over five years using straight$-$line depreciation$).$ All of this equipment was still owned at the end of $2022$ EXCEPT for the asset sold and explained in #$7$ above. Note: None of the depreciation should be claimed on Form $1125$A$.$b$.$ On October $17,2022,$ the corporation acquired and placed in service a piece of equipment costing $$112,000.$ The equipment is five$-$year MACRS property for tax depreciation. For tax purposes, the corporation is electing to expense the entire cost of the property under Section $179$ but elected out of bonus depreciation. $($For book purposes the company is depreciating the equipment over five years using straight$-$line depreciation$).14.$ Other expenses include $$5,000$ for premiums paid on term life insurance policies for which FPI is the beneficiary. The policies cover the lives Fiona and Katie. Book Balance SheetJanuary $1,2022$December $31,2022$Assets: Cash$$240,000$ $$230,000$ Accounts receivable$600,000700,000$Allowance for doubtful accounts$(35,000)(40,000)$Inventory$1,400,0001,700,000$US Government Bonds$50,00050,000$State and local bonds$140,000140,000$Investments in stock$300,000275,000$Building$1,400,0001,400,000$Accumulated depreciation building$(140,000)(168,000)$Equipment$100,000200,000$ Accumulated depreciation $(60,000)(96,000)$Land$900,000900,000$ Other assets$250,000270,000$Total Assets$$5,145,000$ $$5,561,000$ Liabilities and Shareholders' Equity Accounts payable$$250,000$ $$220,000$ Other current liabilities$125,000120,000$Mortgage$800,000790,000$Other liabilities$200,000162,000$Capital stock $-$ common$600,000600,000$Retained earnings $-$ unappropriated$3,170,0003,669,000$Total Liabilities and Shareholders' Equity$$5,145,000$ $$5,561,000$ Book Income Statement $2022$ Income from Operations: Sales$$3,475,000$ Sales returns and allowances$(95,000)$Cost of goods sold $(834,000)$Gross Profit from Operations$2,546,000$ Other Income$/($Loss$)$ Life insurance$50,000$Capital gain$8,000$ Gain from disposition of fixed assets$2,000$Dividend income$30,000$Interest income$10,000$Gross Profit$2,646,000$ Expenses: Compensation $(1,300,000)(1,300,000)(68,000)(15,000)(5,000)(7,000)(27,000)(45,000)(60,000)(56,000)(62,000)(52,000)(24,000)(40,000)(6,000)(40,000)(1,807,000)(1,300,000)$ Depreciation $(68,000)$ Bad debt expense $(15,000)$ E