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 Kingdoms 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 11-1111112, 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. Janets Social Security number is 123-45-6788, and Kims Social Security number is 123-45-6787. 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 Kingdoms financial statements for 2018 are shown below. An Income Statement shows the following. Part 1: income. Gross sales are $5,750,000. Sales returns and allowances are negative $200,000. Net sales are the difference: $5,550,000. Cost of goods sold are negative $2,300,000 which is subtracted from the sales leading to the Gross profit $3,250,000. Dividends received from stock investments in less-than-20%-owned United States corporations $43,750. Interest income: State bonds is $15,000 and Certificates of deposit is $20,000 for a total of $35,000 dollars interest income. Total income. 3,328,750 dollars. Part 3: Expenses. Salaries of officers. Janet Morton. $262,500. Kim Wong. $262,500. Total officer salaries. $525,000. Salaries of clerical and sales. $725,000. Taxes for state, local, and payroll. $238,000. Repairs and maintenance. $140,000. Interest expense. Loan to purchase state bonds. $9,000 dollars. Other business loans. $207,000.Total interest expense. $216,000. Advertising. $58,000. Rental expense. $109,000. Depreciation. Note: Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 45 62 for depreciation. If you solve this problem using Intuit Pro Connect, enter the amount of depreciation on line 20 of Form 11 20. The amount in this balance sheet is $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. Negative $2,255,000. Net income before taxes. $1,073,750. Federal income tax negative $221,734. Net income per books. $852,016.Enlarge Image A balance sheet shows the following. Part 1. Assets. Cash. January 1, 2018. $1,200,000. December 31, 2018. $1,039,461. Assets. Trade notes and accounts receivable. January 1, 2018. $2,062,500. December 31, 2018. $2,147,000. Assets. Inventories. January 1, 2018. $2,750,000. December 31, 2018. $3,030,000. Assets. Stock investment. January 1, 2018. $1,125,000. December 31, 2018. $1,125,000. Assets. State bonds. January 1, 2018. $375,000. December 31, 2018. $375,000. Assets. Certificates of deposit. January 1, 2018. $400,000. December 31, 2018. $400,000 Assets. Prepaid Federal tax. January 1, 2018. 0. December 31, 2018. $2,266. Assets. Buildings and other depreciable assets. January 1, 2018. $5,455,000. December 31, 2018. $5,455,000. Assets. Accumulated depreciation. January 1, 2018. Negative $606,000. December 31, 2018. Negative $712,000. Assets. Land. January 1, 2018. $812,500. December 31, 2018. $812,500. Assets. Other assets. January 1, 2018. $140,000. December 31, 2018. $128,500. Assets. Total assets. January 1, 2018. $13,714,000. December 31, 2018. $13,802,727. Part 2. Liabilities and Equity. Accounts payable. January 1, 2018. $2,284,000. December 31, 2018. $1,840,711. Liabilities and Equity. Other current liabilities. January 1, 2018. $175,000. December 31, 2018. $155,000. Liabilities and Equity. Mortgages. January 1, 2018. $4,625,000. December 31, 2018. $4,575,000. Liabilities and Equity. Capital stock. January 1, 2018. $2,500,000. December 31, 2018. $2,500,000. Liabilities and Equity. Retained earnings. January 1, 2018. $4,130,000. December 31, 2018. $4,732,016. Liabilities and Equity. Total liabilities and equity. January 1, 2018. $13,714,000. December 31, 2018. $13,802,727. During 2018, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2018. Suggested software: Tax Online. Forms to complete and hand in: Form 1120 (pages 1-6, includes Schedule M-1 if required), Form 1125-A, Schedule G, Schedule M-3 (if required then page 1-3), and Form 1125-E.