In this scenario, you will practice entering the following:

Balance Sheet

Income Statement

Instructions

This practice return will help you become more

familiar with corporate return preparation. Use the

scenario information and the attached source

documents to complete the $2022$ Federal Form $1120$

and any schedules necessary.

Forms may be obtained at

www$.$irs.gov.

For any information not provided, please use

reasonable assumptions.

Attached Source Documents

Balance Sheet

Income Statement

SCENARIO INFORMATION

Carmen Strand and Heidi Klein own and operate The

Middletown Metal Shop, Inc. The corporation was

formed on May $1,2001.$ Carmen and Heidi are both full$-$

time employees and United States citizens. Other

pertinent information is given below.

CORPORATION INFORMATION

STOCKHOLDER INFORMATIONADDITIONAL INFORMATION

The company provided the following additional information:

The company took a physical count of its inventory on the last day of the year. On that date, it was determined

that ending inventory was $$360,000.$ This is not reflected in the financial statements below.

Dividends received were from stock investment in less than $20\%$ owned U$.$S$.$ corporations.

The corporation's estimated bad debt expense for the year was $$5,000.$ Actual bad debts were $$1,000.$

Tax depreciation for the year was $$50,000$

Meals and Entertainment include the corporation's expenses for a suite at Harrisburg River Front Stadium, home

of professional baseball Harrisburg Senators. The cost of the suite was $$10,000,$ which includes event tickets for

$$4,000.$

Life Insurance Premiums were paid on term policies covering the lives of two owners. The corporation is the

beneficiary.

Each of the four $$37,500$ timely made estimated tax payments were recorded as Federal Income Taxes Paid.

The corporation distributed a cash dividend of $$60,000$ during the year.

Financial Statements

A tentative Balance Sheet and Income Statement for the corporation are given below.THE MIDDLETOWN METAL SHOP, INC.

COMPARATIVE BALANCE SHEET

JANUARY $1,2022$ & DECEMBER $31,2022$