Completing Form 1120S

GENERAL COMPANY INFORMATION

Thomas King (president) and Dawn Valentine (vice president) each own 50% of King & Valentine, Inc. (KVI). No other class of stock is authorized. On February 4, 2005, they formed KVI to provide accounting and tax services. It was known for its slogan, "Royal Service From Accountants Who Care."

KVI's business address is 219 Accountants Lane, Indianapolis, IN 46424; its telephone number is (317) 243-1120; and its e-mail address is .

Its employer identification number is 31-4655421 and the principal business activity code is 541210.

Thomas and Dawn are the only full-time accountants employed by KVI and they perform all of the accounting services of the corporation. Thomas's Social Security number is 308-99-2431 and Dawn's Social Security number is 410-50-8840.

KVI is a cash-method, calendar-year taxpayer. KVI uses the straight-line method of depreciation for both book and tax purposes. (You are not provided enough detailed data to be completing Form 4562 [depreciation]. Enter the amount of depreciation on line 14 of Form 1120S.) The corporation does not maintain any inventory.

During the year, the corporation distributed cash of $26,291 (13,145.50 per shareholder).

KVI Income Statement

Income:

Accounting fees$896,000

Interest income (certificates of deposit)3,600

Total Income$899,600

Expenses:

Salaries-officers:

Thomas King$260,000

Dawn Valentine260,000$520,000

Salaries-clerical42,000

Taxes:

Property26,810

Payroll28,280

State income3,140

Other miscellaneous7,39065,620

Repairs and maintenance16,340

Meals and entertainment8,460

Travel5,600

Charitable contributions1,200

Interest expense on business loans31,100

Advertising23,250

Rental expense14,650

Depreciation28,910

Contributions to pension plans45,000

Employee benefit programs21,170

Accounting service12,500

Dues and subscriptions5,100

Insurance20,750

Legal and professional services11,000

Miscellaneous4,360

Telephone7,700

Total expenses(884,710)

Net income$ 14,890

KVI Balance Sheet

AssetsJanuary 1, 20XXDecember 31, 20XX

Cash$21,610$22,580

Accounts Receivable41,10033,300

Certificates of deposit144,000137,000

Depreciable assets210,922221,488

Accumulated depreciation(47,520)(76,430)

Land42,00042,000

Other assets3,6382,490

Total Assets$ 415,750$ 382,428

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Liabilities and EquityJanuary 1, 20XXDecember 31, 20XX

Accounts payable$21,000$16,036

Other current liabilities17,11011,853

Mortgages126,000114,300

Capital stock200,000200,000

Retained earnings51,64040,239

Total Liabilities and Equity$ 415,750$ 382,428

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