Essentials of Federal Income Taxation 23. Form 1120-S. (Obj. 5) Prince Corporation (EIN 70-2152973), an S corporation, operates as a small variety store on the accrual basis. It is located at 1701 Governors Drive, College Station, TX 77843. The company was incorporated on January 2, 1999, and elected S corporation status on the same day. The business code is 5995. John R. Prince (SSN 201-00-5064) and his wife, Joyce B. Prince (SSN 265-00-8133) each own 35% of the corporation. Together they manage the store. The remaining stock is owned by John's father. John is President; Joyce is VP and Treasurer. At the end of the calendar year 2021, the income statement accounts, balance sheet accounts, and other information taken from the records are as follows. Inventory, January 1, 2021 (at cost) Inventory, December 31, 2021 (at cost) Purchases (net) Sales revenue Sales returns and allowances Taxable interest income Tax exempt interest Depreciation expense ("book" depreciation was $7,000) Bad debts expense ("book" bad debt expense was $1,000) Repairs and maintenance Interest expense (business related) Payroll taxes Salaries and wages Compensation of officers Rental of equipment Charitable contributions $ 29,500 32,400 133,800 246,500 15,900 4,650 6,000 5,200 1,500 3,300 2,700 7,800 30,000 24,500 700 1,600 1,400 24,000 108,700 Advertising Distributions made during the year Total assets, December 31, 2021 Based on this information, the Princes have asked you to prepare the 2021 Form 1120-S for Prince Corporation. The return will be filed at the IRS Center in Ogden, Utah and will be signed by John Prince on March 10, 2022. Even though it is not required, prepare Schedules M-1 and M-2. Do not prepare Schedule L. On page 4, assume that the net income per books of Schedule M-1 (line 1) is $30,350 and the beginning balance of the AAA is $42,630 (Schedule M-2 (line 1a)). The beginning balance in the Other adjustments account (Schedule M-2 (line 1b)) is $19,400. Assume that Form 1125-A showing the calculation of Cost of Goods Sold (Form 1120-S, line 2) has been completed. Schedule K-1 should be prepared for Joyce's 35% share of the S corporation's items of income and deductions. John and Joyce live at 1074 Bright Leaf Square, College Station, TX 77841.