Note: This problem is for the 2018 tax year.

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 Kingdom's 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 11-1111111, 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. Janet's Social Security number is 123-45-6789, and Kim's Social Security number is 987-65-4321.

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 2018, the corporation distributed cash dividends of $250,000.

Pet Kingdom's financial statements for 2018 are shown below.

Income Statement
Income
Gross sales			$ 5,750,000
Sales returns and allowances			(200,000)
Net sales			$ 5,550,000
Cost of goods sold			(2,300,000)
Gross profit			$ 3,250,000
Dividends received from stock investments in less-than-20%-owned U.S. corporations			43,750
Interest income:
State bonds	$ 15,000
Certificates of deposit	20,000		35,000
Total income			$ 3,328,750
Expenses
Salariesofficers
Janet Morton	$262,500
Kim Won	262,500	$525,000
Salariesclerical and sales		725,000
Taxes (state, local, and payroll)		238,000
Repairs and maintenance		140,000
Interest expense:
Loan to purchase state bonds	$ 9,000
Other business loans	207,000	216,000
Advertising		58,000
Rental expense		109,000
Depreciation*		106,000
Charitable contributions		38,000
Employee benefit programs		60,000
Premiums on term life insurance policies on lives of Janet Morton and Kim Wong; Pet Kingdom is the designated beneficiary		40,000
Total expenses			(2,255,000)
Net income before taxes			$ 1,073,750
Federal income tax			(221,734)
Net income per books			$ 852,016

*Depreciation for tax purposes is $136,000.

Balance Sheet
Assets	January 1, 2018		December 31, 2018
Cash	$ 1,200,000		$ 1,037,750
Trade notes and accounts receivable	2,062,500		2,147,000
Inventories	2,750,000		3,030,000
Stock investment	1,125,000		1,125,000
State bonds	375,000		375,000
Certificates of deposit	400,000		400,000
Prepaid Federal tax	-0-		2,266
Buildings and other depreciable assets	5,455,000		5,455,000
Accumulated depreciation	(606,000)		(712,000)
Land	812,500		812,500
Other assets	140,000		128,500
Total assets	$13,714,000		$13,802,727
Liabilities and Equity	January 1, 2018		December 31, 2018
Accounts payable	$ 2,284,000		$ 1,840,711
Other current liabilities	175,000		155,000
Mortgages	4,625,000		4,575,000
Capital stock	2,500,000		2,500,000
Retained earnings	4,130,000		4,732,016
Total liabilities and equity	$13,714,000		$13,802,727

During 2018, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS.

If an answer is zero, enter "0".

Enter all amounts as positive numbers.

If required, round final answers to the nearest dollar.

Please help with Schedule M-1, M-2, M-3