On February 12, 2002, Nancy Trout and Delores Lake formed Kingfisher Corporation to sell fishing tackle. Pertinent information regarding Kingfisher is summarized as follows: Kingfishers business address is 1717 Main Street, Ely, MN 55731; its telephone number is (218) 555-2211; and its e-mail address is k..r@kf.com. The employer identification number is 11-1111111, and the principal business activity code is 451110. Nancy owns 50% of the common stock and is president of the company, and Delores owns 50% of the common stock and is vice president of the company. No other class of stock is authorized. Both Nancy and Delores are full-time employees of Kingfisher. Nancys Social Security number is 123-45-6789, and Deloress Social Security number is 987-65-4321. Kingfisher is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Kingfisher uses the straight-line method of deprecation for book purposes and accelerated depreciation (MACRS) for tax purposes. During 2012, the corporation distributed cash dividends of $64,000. Income Statement Income Gross sales $1,884,000 Sales returns and allowances (64,000) Net sales $1,820,000 Cost of goods sold (736,000) Gross profit $1,084,000 Dividends received from stock investments in less-than-20%-owned U.S. corporations 9,000 Interest income State bonds $ 2,500 Certificates of deposit 4,000 6,500 Total income $1,099,500 Expenses Salariesofficers Nancy Trout $150,000 Delores Lake 150,000 $300,000 Salariesclerical and sales 232,000 Taxes (state, local, and payroll) 68,000 Repairs and maintenance 45,000 Interest expense: Business loans $ 10,000 Loan to purchase state bonds 1,800 11,800 Advertising 5,000 Rental expense 38,000 Depreciation* 32,000 Charitable contributions 12,000 Employee benefit programs 19,000 Premiums on term life insurance policies on lives of Nancy Trout and Delores Lake; Kingfisher is the designated beneficiary 12,800 Legal and accounting services 16,000 Total expenses (791,600) Net income before taxes $ 307,900 Federal income tax (105,593) Net income per books $ 202,307