Please prepare the appropriate tax forms and schedules for the problem below. You may use the software provided with your textbook or prepare the forms by hand. Instructions for all forms and schedules may be obtained from the IRS website. A hard copy of your solution with schedules and forms in proper attachment order (stapled or clipped) is to be submitted. Check figure: Taxable Income (line 30) = $634,100.

• On November 17, 2005, Leigh Sheridan and Nicolette Rook opened Heaths Sweets Candy Shop, and incorporated as the shop as Heath, Inc. Their first store was very successful, and they have subsequently opened a chain of Heaths Sweets Candy Shops. As they have grown, they have issued stock to other investors. Currently, Leigh owns 40% of the shares and Nicolette owns 40% of the shares, with the remaining 20% owned by outside investors.
• Heath Inc.s business address is 2120 Candy Cane Lane, Great Falls, Montana 59401; its telephone number is (575) 541-1122; and its email address is Heath@sweetcandyshop.com.
• The employer identification number is 11-1111111, and the principal business activity is Confectionery & nut stores and principal business code is 445292.
• Leigh is president of the company, and Nicolette is vice president.
• Leigh and Nicolette are full-time employees of Heath, Inc. Leighs Social Security number is 123-45-6789, and Nicolettes Social Security number is 987-65-4321.
• Heath, Inc. is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Heath, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.
• Heath, Inc.s income statement for 2017 is shown on page 2.
• Heath, Inc.s balance sheet is as follows:

• 	January 1, 2017	December 31, 2017
  Cash	1,200,000	1,250,000
  Accounts receivable	2,062,500	2,247,000
  Inventories	2,750,000	3,030,000
  Stock investment	2,125,000	2,075,000
  State of Montana bonds	375,000	375,000
  Certificates of Deposit	400,000	400,000
  Buildings and other depreciable assets	1,805,000	1,805,000
  Accumulated depreciation	(727,000)	(1,602,000)
  Land	812,500	812,500
  Other assets	140,000	178,500
  Total assets	10,943,000	10,571,000
  Accounts payable	2,284,000	1,970,780
  Other current liabilities	175,000	155,000
  Mortgages	4,625,000	4,575,000
  Capital stock	2,500,000	2,500,000
  Retained Earnings	1,359,000	1,370,220
  Total liabilities and equity	10,943,000	10,571,000