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Posted on Jul 08, 2024

I need help filing out schedule M-1 and M-2 to this question as what I have now is wrong. On November 1, 2008, Janet Morton

I need help filing out schedule M-1 and M-2 to this question as what I have now is wrong.

On November 1, 2008, Janet Morton and Kim Wong formed Pet Kingdom, Inc., to sell pets and pet supplies. Pertinent information regarding Pet Kingdom is summarized as follows:

Pet Kingdoms business address is 1010 Northwest Parkway, Dallas, TX 75225; its telephone number is (214) 555-2211; and its e-mail address is petkingdom@pki.com.
The employer identification number is 11-1111112, and the principal business activity code is 453910.
Janet and Kim each own 50% of the common stock; Janet is president and Kim is vice president of the company. No other class of stock is authorized.
Both Janet and Kim are full-time employees of Pet Kingdom. Janets Social Security number is 123-45-6788, and Kims Social Security number is 123-45-6787.
Pet Kingdom is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Pet Kingdom uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.
During 2019, the corporation distributed cash dividends of $250,000.
*Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). If you solve this problem using Intuit ProConnect, enter the amount of depreciation on line 20 of Form 1120.
During 2019, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2019. Suggested software: ProConnect Tax Online.

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$ 5,750,000 (200,000) $ 5,550,000 (2,300,000) $3,250,000 43,750 $ 15,000 20,000 35,000 $ 3,328,750 $ 262,500 262,500 Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends received from stock investments in less-than-20%- owned U.S. corporations Interest income: State bonds Certificates of deposit Total income Expenses Salaries-officers: Janet Morton Kim Wong Salaries-clerical and sales Taxes (state, local, and payroll) Repairs and maintenance Interest expense: Loan to purchase state bonds Other business loans Advertising Rental expense Depreciation Charitable contributions Employee benefit programs Premiums on term life insurance policies on lives of Janet Morton and Kim Wong; Pet Kingdom is the designated beneficiary Total expenses Net income before taxes Federal income tax Net income per books $525,000 725,000 238,000 140,000 $ 9,000 207,000 216,000 58,000 109,000 106,000 38,000 60,000 40,000 (2,255,000) $ 1,073,750 (221,734) $ 852,016 *Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (denreciation. If you solve this problem using Intuit ProConnect enter the amount of Balance Sheet Assets Cash Trade notes and accounts receivable Inventories Stock investment State bonds Certificates of deposit Prepaid Federal tax Buildings and other depreciable assets Accumulated depreciation Land Other assets Total assets Liabilities and Equity Accounts payable Other current liabilities Mortgages Capital stock Retained earnings Total liabilities and equity January 1, 2019 $ 1,200,000 2,062,500 2,750,000 1,125,000 375,000 400,000 -0- 5,455,000 (606,000) 812,500 140,000 $13,714,000 December 31, 2019 $ 1,039,461 2,147,000 3,030,000 1,125,000 375,000 400,000 2,266 5,455,000 (712,000) 812,500 128,500 $13,802,727 January 1, 2019 $ 2,284,000 175,000 4,625,000 2,500,000 4,130,000 $13,714,000 December 31, 2019 $ 1,840,711 155,000 4,575,000 2,500,000 4,732,016 $13,802,727 During 2019, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2019. Suggested software: ProConnect Tax Online. 1120: 2019 U.S. Corporation Income Tax Return Form 1120 (2019) Pet Kingdom 11-1111112 Page 6 Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets (a) (b) (c) (d) 1 Cash 1,200,000 1,039, 461 2 a Trade notes and accounts receivable 2.062,500 2,147,000 b Less allowance for bad debts 2,062,500. 2,147,000 3 Inventories 2,750,000 3.030,000 4 U.S. government obligations 5 Tax-exempt securities (see instructions) 375,000 375,000 6 Other current assets (attach statement) See St 1 2,266. 7 Loans to shareholders 3 Mortgage and real estate loans 9 Other investments (attach statement See St 2 1,525,000. 1,525,000 10 a Buildings and other depreciable assets 5, 455,000 5,455,000 b Less accumulated depreciation 606, 000. 4,849,000 712,000 4,743,000. 11 a Depletable assets b Less accumulated depletion 12 Land (net of any amortization) 812,500 812,500 13 a Intangible assets (amortizable only) b Less accumulated amortization 14 Other assets (atach statement See St 3 140,000. 128,500. 15 Total assets 13,714,000 13,802, 727. Liabilities and Shareholders' Equity 16 Accounts payable 2,284,000 1,840,711 17 Morgages, notes, bonds payable in less than 1 year 4,625,000. 4,575,000 18 Other current abilities attach st) See St 4 175,000 155,000. 19 Loans from shareholders 20 Mortgages, notes, bonds payable in 1 year or more 21 Other abilities attach statement 22 Capital stock: a Preferred stock b Common stock 2,500,000 2,500,000 2,500,000 2,500,000 23 Additional paid-in capital 24 Retained earnings - Approp (at) See St 5 4,130,000 4,732,016 25 Retained earnings - Unappropriated 621,016. 26 Adjmt to shareholders equity (att st) 27 Less cost of treasury stock 28 Total liabilities and shareholders' equity 13,714,000. 14,423,743 Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books 871,016 7 Income recorded on books this year not 2 Federal income tax per books 221 , 734 included on this return (itemize): 3 Excess of capital losses over capital gains Tax-exempt interest $ 15,000 4 Income subject to tax not recorded on books this year (itemize): 15,000 8 Deductions on this return not charged 5 Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): a Depreciation $ a Depreciation b Charitable contrions $ b Charitable contributions c Travel & entertainment 15,000. 1,077,750 9 Add lines 7 and 8 6 Add lines 1 through 5 1,092,750 10 Income 1020 1. line 28 - line 6less line 9 Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L) 1 Balance at beginning of year 5 Distributions a Cash 2 Net income (loss) per books 871,016. c Property 3 Other increases (itemize): 6 Other decreases itemize): 250,000 b Stock 7 8 Add lines 1, 2 and 3 Add lines 5 and 6 Balance at end of year line 4 less line 7 871,016 250,000 621,016 Form 1120 (2019) CPCA0284 0822/19 $ 5,750,000 (200,000) $ 5,550,000 (2,300,000) $3,250,000 43,750 $ 15,000 20,000 35,000 $ 3,328,750 $ 262,500 262,500 Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends received from stock investments in less-than-20%- owned U.S. corporations Interest income: State bonds Certificates of deposit Total income Expenses Salaries-officers: Janet Morton Kim Wong Salaries-clerical and sales Taxes (state, local, and payroll) Repairs and maintenance Interest expense: Loan to purchase state bonds Other business loans Advertising Rental expense Depreciation Charitable contributions Employee benefit programs Premiums on term life insurance policies on lives of Janet Morton and Kim Wong; Pet Kingdom is the designated beneficiary Total expenses Net income before taxes Federal income tax Net income per books $525,000 725,000 238,000 140,000 $ 9,000 207,000 216,000 58,000 109,000 106,000 38,000 60,000 40,000 (2,255,000) $ 1,073,750 (221,734) $ 852,016 *Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (denreciation. If you solve this problem using Intuit ProConnect enter the amount of Balance Sheet Assets Cash Trade notes and accounts receivable Inventories Stock investment State bonds Certificates of deposit Prepaid Federal tax Buildings and other depreciable assets Accumulated depreciation Land Other assets Total assets Liabilities and Equity Accounts payable Other current liabilities Mortgages Capital stock Retained earnings Total liabilities and equity January 1, 2019 $ 1,200,000 2,062,500 2,750,000 1,125,000 375,000 400,000 -0- 5,455,000 (606,000) 812,500 140,000 $13,714,000 December 31, 2019 $ 1,039,461 2,147,000 3,030,000 1,125,000 375,000 400,000 2,266 5,455,000 (712,000) 812,500 128,500 $13,802,727 January 1, 2019 $ 2,284,000 175,000 4,625,000 2,500,000 4,130,000 $13,714,000 December 31, 2019 $ 1,840,711 155,000 4,575,000 2,500,000 4,732,016 $13,802,727 During 2019, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2019. Suggested software: ProConnect Tax Online. 1120: 2019 U.S. Corporation Income Tax Return Form 1120 (2019) Pet Kingdom 11-1111112 Page 6 Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets (a) (b) (c) (d) 1 Cash 1,200,000 1,039, 461 2 a Trade notes and accounts receivable 2.062,500 2,147,000 b Less allowance for bad debts 2,062,500. 2,147,000 3 Inventories 2,750,000 3.030,000 4 U.S. government obligations 5 Tax-exempt securities (see instructions) 375,000 375,000 6 Other current assets (attach statement) See St 1 2,266. 7 Loans to shareholders 3 Mortgage and real estate loans 9 Other investments (attach statement See St 2 1,525,000. 1,525,000 10 a Buildings and other depreciable assets 5, 455,000 5,455,000 b Less accumulated depreciation 606, 000. 4,849,000 712,000 4,743,000. 11 a Depletable assets b Less accumulated depletion 12 Land (net of any amortization) 812,500 812,500 13 a Intangible assets (amortizable only) b Less accumulated amortization 14 Other assets (atach statement See St 3 140,000. 128,500. 15 Total assets 13,714,000 13,802, 727. Liabilities and Shareholders' Equity 16 Accounts payable 2,284,000 1,840,711 17 Morgages, notes, bonds payable in less than 1 year 4,625,000. 4,575,000 18 Other current abilities attach st) See St 4 175,000 155,000. 19 Loans from shareholders 20 Mortgages, notes, bonds payable in 1 year or more 21 Other abilities attach statement 22 Capital stock: a Preferred stock b Common stock 2,500,000 2,500,000 2,500,000 2,500,000 23 Additional paid-in capital 24 Retained earnings - Approp (at) See St 5 4,130,000 4,732,016 25 Retained earnings - Unappropriated 621,016. 26 Adjmt to shareholders equity (att st) 27 Less cost of treasury stock 28 Total liabilities and shareholders' equity 13,714,000. 14,423,743 Schedule M-1 Reconciliation of Income (Loss) per Books With Income per Return Note: The corporation may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books 871,016 7 Income recorded on books this year not 2 Federal income tax per books 221 , 734 included on this return (itemize): 3 Excess of capital losses over capital gains Tax-exempt interest $ 15,000 4 Income subject to tax not recorded on books this year (itemize): 15,000 8 Deductions on this return not charged 5 Expenses recorded on books this year not against book income this year (itemize): deducted on this return (itemize): a Depreciation $ a Depreciation b Charitable contrions $ b Charitable contributions c Travel & entertainment 15,000. 1,077,750 9 Add lines 7 and 8 6 Add lines 1 through 5 1,092,750 10 Income 1020 1. line 28 - line 6less line 9 Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Line 25, Schedule L) 1 Balance at beginning of year 5 Distributions a Cash 2 Net income (loss) per books 871,016. c Property 3 Other increases (itemize): 6 Other decreases itemize): 250,000 b Stock 7 8 Add lines 1, 2 and 3 Add lines 5 and 6 Balance at end of year line 4 less line 7 871,016 250,000 621,016 Form 1120 (2019) CPCA0284 0822/19