Corporate Taxation (A class in my Accounting Program)

Harrell and Smith, Inc., 204 Ambulance Street, Anywhere, CA 92345, is a corporation (EIN 57-1234567) formed on January 1, 2010. Information concerning the corporation and its two shareholders follows. It uses tax/cash basis accounting, did not pay dividends in excess of earnings and profits, has no foreign shareholders, is not publicly traded, and has no NOL carrybacks.

Bruce Harrell (SSN 412-34-5670), 1018 Lexington Downs, Anywhere, CA 92345, is a 60% shareholder. Della Smith (SSN 412-34-5671), 4564 Yates Road, Anywhere, CA 92345, is a 40% shareholder. Bruce received a dividend of $60,000, and Della received a dividend of $40,000. Both of these dividends are in addition to their salaries.

HARRELL AND SMITH, INC. Comparative Balance Sheet As of December 31, 2014, and December 31, 2015
	12/31/14	12/31/15
Assets
Cash	$ 39,955	$ 45,459
Investments	258,456	169,125
Office equipment	225,000	310,759
Accumulated depreciation (equipment)	(156,000)	(165,379)
Building	491,200	491,200
Accumulated depreciation (building)	(37,232)	(49,826)
Total assets	$821,379	$801,338
Liabilities and equity
Notes payable	$353,600	$335,458
Common stock	10,000	10,000
Retained earnings	457,779	455,880
Total liabilities and equity	$821,379	$801,338

HARRELL AND SMITH, INC. Income Statement For the Year Ending December 31, 2015
Revenue
Consulting income	$866,689
Interest income	4,231
Rental income	9,000
Dividend income from less-than-20%-owned domestic corporation(qualified)	8,234
Long-term capital losses	(8,200)
Total revenue	$879,954
Expenses
Salaries and wages (nonowners)	$253,000
Officers salaries
Harrell	225,000
Smith	150,000
Depreciation	21,973
Interest expense	20,127
Taxes and licenses	24,051
Utilities	15,500
Travel	11,850
Meals and entertainment (100%)	12,452
Auto	18,500
Insurance (health)	7,000
Accounting and legal	6,450
Repairs	3,200
Charitable contributions	12,000
Payroll penalties	750
Total expenses	$781,853
Net income	$ 98,101

Prepare Form 1120, pages 1 5, for Harrell and Smith, Inc. Schedule D and Form 4562 can be omitted (the information given is not sufficient to complete these forms).

(Enter all amounts as positive unless otherwise indicated in the forms themselves. Round your intermediate computations and final answers to the nearest whole dollar value.)

Use the appropriate Corporate Tax Tables.

Complete 1120S page 1, Schedule C page 2, Schedule J, Schedule L