On November 1, 2011, 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 2022, the corporation distributed cash dividends of $250,000.

Pet Kingdoms financial statements for 2022 are shown below.

*Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). If you solve this problem using Intuit ProConnect, enter the amount of depreciation on line 20 of Form 1120.

During 2022, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare Pet Kingdoms corporate tax return for tax year 2022 using Form 1120 (and any other appropriate forms and schedules).

Complete all schedules needed.

B-32 Appendix B Taxformt Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). If you solve this problem using Intuit ProConnect, enter the amount of depreciation on line 20 of Form 1120. During 2022, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare Pet Kingdom's corporate tax return for tax year 2022 using Form 1120 (and any other appropriate forms and schedules). Income Statement Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends received from stock investments in less-than-20\%owned U.S. corporations Interest income: State bonds Certificates of deposit Total income $5,750,000 $5,550,000(200,000) $3,250,000(2,300,000) 43,750 \$ 15,000 20,000 $3,328,75035,000 Expenses Salaries-officers: Janet Morton Kim Wong Salaries-clerical and sales Taxes (state, local, and payroll) Repairs and maintenance Interest expense: Loan to purchase state bonds Other business loans Advertising Rental expense Depreciation* Charitable contributions (cash) Employee benefit programs Premiums on term life insurance policies on lives of Janet Morton and Kim Wong; Pet Kingdom is the designated beneficiary Total expenses Net income before taxes Federal income tax Net income per books $262,500 262,500 $9,000 207,000 $52$,000 725,000 238,000 140,000 216,000 58,000 109,000 106,000 38,000 60,000 40,000 $1,073,750(2,255,000) (221.734) $852,016 B-34 Appendix B Tax Forms Form 1120 (2002) Schedule J Tax Computation and Payment (see instructions) Part 1-Tax Computation 1 Check if the corporation is a member of a controlled group (attach Schedile O (Form 1120). See instructions 2 Income tax. See instructions 3 Base erosion minimum tax amount (attach Form 8991) 4 Add lines 2 and 3 5a Foreign tax credit (attach Form 1118) b Credi from Form 8834 (see instructions) c General business credt (attach Form 3800) d Credit for prior year minimum tax (attach Form 8827) - Bond credits from Form 8912 6 Total credits. Add lines 5 a through 50 7 Subtract line 6 from line 4 8 Personal holding company tax (attach Schedule PH (Form 1120)) - 9. Recapture of investment credit (attach Form 4255) b Recapture of low-income housing credit (attach Form 8611) c Interest due under the look-back method-completed long-term contracts fattach Form 8697). d Interest due under the look-back method-income forbcast method (attach Form 8866) - Alternative tax on qualifying shipping activities (attach Form 8902) f Intorest/tax due under section 453A(c) and/or section 453A 9 Other (sce instructions - attach statement) 10 Total. Add lines 9a through 9g. 11 Total tax. Add lines 7, 8, and 10. Enter here and on pagp 1. line 31 Part II-Reserved For Future Use 12 Reserved for future use Part III-Payments and Refundable Credits Forn 1120 ger2: Fom 1120(cos2) Schedule C Dividends, Inclusions, and Special Deductions isee instructions) 1 Dividends from less-than-20\%-owned domeatic eoporstions fother than dets-franced stocks: 2 Diudends from 20%-ce-more-owned domestic corporations fother than debt-finunesd noods 3 Dividends on centain debt-finsticed stock of domestic and foreign copporitione - Ovidonds from less-than-20K-owned foreign corpondions and centain FSOH 5. Dividends from wholy owned foreign subsidiarien - Subtotal. Add lnes 1 Errough 8 . See inatructions for iminations 10 Dividends from domestic corporations recelved by a srual buthess huetreet compsyy operating undes the Small Bushess investment Act of 1958 11 Dividends from afflisted group memben 12 Oividends trom certain FSCs copporation (excluding hybrid dividendt) (sew instructiona) 14 Dividends from foreign corporations not holuded on line 3, 6, 7, 2., 11, 12 or 12 Including any hybrid dividendst. 15 Reserved tor fuhre use 16 subpart F inclusions derived from the sale by a controlled forwign conporaton cro of (see inutructions) 5471) (ses instructiona) Fomist 5471) (pee instructions). 13. Grows-up for foreign tuees deemed paid 18. 1 - DisC and former DisC dividends not includid on ine 1,2,3 20 Other dividends 21 Dedustion for dividends paid an certain preferred stock of putiec utilites 2a. Soction 250 deduction (artach form 8099 ) Appendix B Terforms B-33 Paos 2 B-36 Appendix B Tax Forms Form 1120 (2002) Schedule K Other Information (continued from page 4) 13 Are the corporation's total receipts (page 1, line 1a, plus lines 4 through 10) for the tax year and its total assets at the end of the tax year less than $250,000 ? If "Yes," the corporation is not required to complete Schedules L, M-1, and M-2. Instead, enter the total amount of cash distributions and the book value of property distributions (other than cash) made during the tax year $ 14 Is the corporation required to file Schedule UTP (Form 1120), Uncertain Tax Position Statement? See instructions If "Yes," complete and attach Schedule UTP. 15a Did the corporation make any payments in 2022 that would require it to file form(s) 1099 ? b If "Yes," did or will the corporation file required Form(s) 1099 ?. 16 During this tax year, did the corporation have an 80%-or-more change in ownership, including a change due to redemption of its own stock? 17 During or subsequent to this tax year, but before the filing of this retum, did the corporation dispose of more than 65% (by valua) of its assets in a taxable, non-taxable, or tax deferred transaction? 18 Did the corporation receive assets in a section 351 transfer in which any of the transferred assets had a fair market basis or fair market value of more than $1 million? 19 During the corporation's tax year, did the corporation make any payments that would require it to fle Forms 1042 and 1042.S under chapter 3 (eoctions 1441 through 1464) or chapter 4 (sections 1471 through 1474) of the Code? 20 Is the corporation operating on a cooperative basis?. 21 During the tax year, did the corporation pay or accrue any interest or royalty for which the deduction is not allowed under section 267A? See instructions If "Yes," enter the total amount of the disalliowod doductions \$ 22 Does the corporation have gross recoipts of at least $500 milion in any of the 3 preceding tax years? (See sections 594(e)/2) and (3i) . If "Yes," complete and attach Form 8991. 23 Did the corporation have an election under section 1630 for any real property trade or business or any farming business in offect during the tax year? See instructions 24 Does the corporation satisfy one or more of the folowing? See instructions . a The corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense. b The corporation's aggregate average annual gross receipts (determined under section 448/c) for the 3 tax years precedng the current tax year are more than \$27 million and the corporation has business interest exponse. c. The corporation is a tax shelter and the corporation has business interest expecse. If "Yea," complete and attach Form 8990. 25 Is the corporation attaching Form 6996 to certify as a Qualified Opportunity Fund? . If "Yes," enter amount from Form 8996 , line 15 26 Since December 22, 2017, did a foreign corporation directly or indirectly acquire substantialy all of the properties held directly ar indirectly by the corporation, and was the ownership percentage (by vote or value) for purposes of section 7874 graater than 50% (for example, the shareholders hold more than 50% of the stock of the foreign corporation)? if "Yes," list the ownership percentage by vote and by value. See instructions Percentage: By Vote By Value