Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of XX-2021019. The company incorporated on December 31, 2015, and began business on January 2, 2016. Table C:3-3 contains balance sheet information at January 1, 2019, and December 31, 2019. Table C:3-4 presents an unaudited GAAP income statement for 2019. These schedules are presented on a book basis. Other information follows the tables.

	January 1, 2019		December 31, 2019
Account	Debit	Credit	Debit	Credit
Cash	$ 516,774.00		$ 815,494.00
Accounts receivable	$ 400,000.00		$ 500,000.00
Allowance for doubtful accounts		$ 20,000.00		$ 25,000.00
Inventory	$ 2,500,000.00		$ 3,500,000.00
Investment in corporate stock	$ 260,000.00		$ 50,000.00
Investment in municipal bonds	$ 30,000.00		$ 30,000.00
Cash surrender value of insurance policy	$ 60,000.00		$ 80,000.00
Land	$ 200,000.00		$ 200,000.00
Buildings	$ 2,000,000.00		$ 2,000,000.00
Accumulated depreciationBuildings		$ 100,000.00		$ 140,000.00
Equipment	$ 750,000.00		$ 1,100,000.00
Accumulated depreciationEquipment		$ 187,500.00		$ 205,000.00
Trucks	$ 100,000.00		$ 100,000.00
Accumulated depreciationTrucks		$ 30,000.00		$ 50,000.00
Accounts payable		$ 300,000.00		$ 270,000.00
Notes payable (short-term)		$ 800,000.00		$ 640,000.00
Accrued payroll taxes		$ 14,880.00		$ 18,600.00
Accrued state income taxes		$ 4,500.00		$ 7,500.00
Accrued federal income taxes		$ 2,500.00		$ 77,361.00
Bonds payable (long-term)		$ 1,800,000.00		$ 600,000.00
Net deferred tax liability		$ 57,394.00		$ 167,593.00
Capital stockCommon		$ 1,500,000.00		$ 1,500,000.00
Retained earningsUnappropriated		$ 2,000,000.00		$ 4,674,440.00
	$ 6,816,774.00	$ 6,816,774.00	$ 8,375,494.00	$ 8,375,494.00