Form 1120 abbreviated tax return. Kernal Corp. is a calendar-year accrual-basis C corporation that commenced operations on January 1, Year 1. The following adjusted accounts appear on Kernal’s records for the year ended December 31, Year 6. Kern is not subject to the uniform capitalization rules.

Revenues and Gains

Gross Sales                                                                  $8,000,000

Dividends: 20%-owned domestic corporation              10,000

Interest:

              U.S. Treasury bonds                                            26,000

              Municipal bonds                                                  25,000

Insurance proceeds                                                           40,000

State franchise tax refund                                                 14,000

Total                                                                             $8,115,000

Costs and Expenses

Cost of Goods Sold                                                     5,350,000

Salaries and wages                                                       1,470,000

Depreciation:

              Real property ⁽¹⁾                                                   50,000

              Personal property ⁽⁴⁾                                         100,000

Bad debt ⁽²⁾                                                                           10,000

State franchise tax                                                              25,000

Vacation expense                                                                10,000

Interest expense ⁽³⁾                                                             16,000

Life insurance premiums                                                   20,000

Federal income taxes                                                       200,000

Entertainment expense                                                     20,000

Other expenses                                                                   29,000

Total expenses                                                              7,300,000

Net Income                                                                 $   815,000

Additional Information:

⁽¹⁾ Real Property Depreciation – The book depreciation is the same as tax depreciation for all the property that was placed in service before January 1, Year 6. The book depreciation is straight-line over the useful life, which is the same as class life.

⁽²⁾ Bad Debt – Represents the increase in the allowance for doubtful accounts based on an aging of accounts receivable. Actual bad debts written off were $7,000.

⁽³⁾ Interest expenses on:

• Mortgage loan - $10,000
• Loan obtained to purchase municipal bonds - $4,000
• Line of credit loan - $2,000

⁽⁴⁾ Personal Property Depreciation – The modified accelerated cost recovery system (MACRS) is elected for the furniture and fixtures (costing $56,000 that were place in service on January 1, Year 6. Company policy is to use half-year convention per books for personal property furniture and fixtures. No election was made by the company to expense part of the cost of the property.

An abbreviated Form 1120 is provided below for the Kernal Corporation. Fill in the appropriate dollar amounts (i.e., no cents are recorded) in the “Amount” column. If the value of a cell is zero, you must enter a zero (“0”) to receive credit for your answer.

Form 1120		U.S. Corporation Income Tax Return	Amount
Income	1	Sales less returns and allowances
	2	Cost of goods sold
	3	Gross profit
	4	Dividends (net)
	5	Interest
	6	Gross rents
	7	Gross royalties
	8	Capital gain net income
	10	Other income
	11	Total income