Cougar, Inc., is a calendar year S corporation. Cougar's Form 1120S shows non-separately stated ordinary income of $80,000 for the year. Johnny owns 40% of the Cougar stock throughout the year. The beginning AAA account balance is given, assume that the beginning balance of the OAA and PTI are zero.

The following is obtained from the corporate records:

Tax exempt - $3,000 Salary paid to Johnny - (52,000) Charitable Contributions - (6,000) Dividends received from a foreign corporation - 5,000 Short-term capital loss - (6,000) Depreciation recapture income - 11,000 Refund of prior state income taxes - 5,000 Cost of goods sold - (72,000) Long-term capital loss - (7,000) Administrative expenses - (18,000) Long-term capital gain - 14,000 Selling Expenses - (11,000) Johnny's beginning stock basis - 32,000 Johnny's additional stock purchase - 9,000 Beginning AAA - 31,000 Johnny's loan to corporation - 20,000

Prepare Form 1120S Schedule M-1 and M-2.