Konk, Inc. is a calendar year, accrual basis taxpayer founded January 1, 2018. The company's 2018 income statement prepared in accordance with GAAP is presented below:

Revenues

Net sales

$3,000,000

Cost of goods sold

-1,910,000

Gross profit

$1,090,000

Expenses

Salaries and wages

$500,000

[1]

Taxes

137,000

[2]

Office supplies

11,000

Contributions to charity

40,000

Insurance

20,000

Depreciation

50,000

[3]

Repairs and maintenance

12,000

Advertising

42,000

Travel and entertainment

25,000

[4]

Legal and accounting

1,000

Total expenses

$838,000

Net income before other items

$252,000

Loss sale of stock

-10,000

[5]

Dividend income

20,000

[6]

Interest

18,000

[7]

Net income

$280,000

The following additional information is provided:

[ 1]Officer salary (C. Konk 388-88-8765, 100% common stock

and 100% time in the business) $ 150,000

Other salaries300,000

Accrued bonuses (all paid 1/5/19, including $10,000 to C. Konk) 30,000

Accrued vacation pay (all vacations will be taken in the summer) 20,000

$ 500,000

[ 2]Taxes consist of:

Federal income taxes (interperiod tax calculation)$60,000

State income taxes37,000

Payroll taxes38,000

Penalty for late payment of taxes 2,000

Total$ 137,000

* The company made $58,000 of federal estimate tax payments for 2018.

[ 3]Depreciation per books is straightline.For tax purposes, depreciation amounted to $86,000.

[ 4]In this number are: Meals of $8,000 and entertainment of $1,000. (50% of meals is deductible. Under new law, no entertainment is deductible)

[ 5]Sale of stock consist of stock of the following unrelated corporations:

Ral Corp. (short-term) $ 1,000

Blu, Inc. (long-term)-11,000

[ 6]Received from .01% stock ownership interest in Microsoft, Inc. = $10,000.

Received from 21% stock ownership interest in Loknok, Inc. = $10,000.

(Both qualify for the dividends received deduction.)

[ 7]Interest revenue consists of interest on:

Corporate bonds$15,000

Municipal bonds3,000

1.Complete only federal form 1120 for 2018. Ignore references to other forms. Complete Schedule K by making up answers to questions where data has not been included. Schedule L and M-2 can be left blank since balance sheets and other information has not been included to complete these.

2.Download the form 1120 and instructions from the IRS home page.Only draft forms are available at this time at http://www.irs.gov/pub/irs-dft/

Please include a work paper that details any supporting calculations and comments about any issues you addressed. Consider this the same as a sheet you would provide to your supervisor at work whose task is to verify every item that you input on the return.

Also, assume on schedule J that the company is allowed a credit from form 3800 of $12,780.

Check figures: Schedule M-1 line 10 = 349,200,amount owed = 137