On February 12, 2015, Nancy Trout and Delores Lake formed Angel Corporation to sell autographed Baseball Memorabilia.

Pertinent information regarding Angel is summarized as follows:

The business address is 27 Gene Autry Way, Tustin CA 92782; its telephone number is (714) 555-5555; and its e-mail address is angel@joetrout.com.

The employer identification number is 27-2727272, 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 Angel Corporation. Nancys Social Security number is 714-66-6788, and Deloress Social Security number is 123-45-6784.

Angel is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method.

Angel uses the straight-line method of deprecation for book purposes and accelerated depreciation (MACRS) for tax purposes.

During 2019, the corporation distributed cash dividends of $80,000.

During 2019, Angel Corporation made estimated tax payments of $27,000 each quarter to the IRS. Prepare a Form 1120 for Angel for tax year 2019. Suggested software: ProConnect Tax Online provided to you on Canvas.

Angels financial statements for 2019 are show below:

You are not provided enough detailed information to complete a Form 4562 (depreciation). If you solve this problem using Intuit ProConnect, enter the amount of deprecation on line 20 of Form 1120

prepare an explanation write up on how you treated the items is the facts above. The explanation is meant to determine if you understand the 1120 assignment. Please explain how you determined what is taxable, not taxable, deductible or not deductible. Also please explain to me how the Schedule L, Schedule M-1, M-2 and M-3 (if required) interrelate with each other. Provide planning ideas to Nancy and Delores for 2020. If the facts aren't in the case, please make your own assumptions and document them.

Income Statement
Income
Gross sales			$2,408,000
Sales returns and allowances			(80,000)
Net sales			$2,328,000
Cost of goods sold			(920,000)
Gross profit			$1,408,000
Dividends received from stock investments in less-than-20%-owned U.S. corporations			12,000
Interest income:
State bonds	$ 14,000
Certificates of deposit	10,000		24,000
Total income			$1,444,000
Expenses
Salariesofficers
Nancy Trout	$160,000
Delores Lake	160,000	$320,000
Salariesclerical and sales		290,000
Taxes (state, local, and payroll)		85,000
Repairs and maintenance		56,000
Interest expense:
Business loans	$ 12,000
Loan to purchase state bonds	8,000	20,000
Advertising		6,000
Rental expense		68,000
Depreciation*		40,000
Charitable contributions		15,000
Employee benefit programs		24,000
Premiums on term life insurance policies on lives of Nancy Trout and Delores Lake; Kingfisher is the designated beneficiary		16,000
Total expenses			(940,000)
Net income before taxes			$ 504,000
Federal income tax			(106,680)
Net income per books			$397,320

*The depreciation expense for taxes is the sames as the depreciation expense per the books.

Balance Sheet
Assets	January 1, 2018		December 31, 2018
Cash	$ 380,000		$ 337,300
Trade notes and accounts receivable	308,400		480,280
Inventories	900,000		1,012,000
State bonds	160,000		160,000
Federal income tax refund	-0-		1,320
Certificates of deposit	140,000		140,000
Stock investments	300,000		300,000
Building and other depreciable assets	240,000		240,000
Accumulated depreciation	(88,800)		(128,800)
Land	20,000		20,000
Other assets	3,600		2,000
Total assets	$2,363,200		$2,564,100
Liabilities and Equity	January 1, 2018		December 31, 2018
Accounts payable	$ 300,000		$ 223,880
Other current liabilities	80,300		40,000
Mortgages	210,000		200,000
Capital stock	500,000		500,000
Retained earnings	1,272,900		1,590,220
Total liabilities and equity	$2,363,200		$2,564,100