Please see the attached question and what I have for the answer. Please help. 'm using H&R Block software.

See CHOCOLATINCPAHEL.pdf

See Problem 6 - S Corporations Form 1120S.docx

Thanks.

Form 1120S U.S. Income Tax Return for an S Corporation OMB No. 1545-0130 Do not file this form unless the corporation has filed or is attaching Form 2553 to elect to be an S corporation. Department of the Treasury Internal Revenue Service Information about Form 1120S and its separate instructions is at www.irs.gov/form1120s. For calendar year 2013 or tax year beginning , ending A S election effective date Name D Employer identification number Chocolat Inc - Pahel 1/15/1997 B Business activity code TYPE OR PRINT number (see instructions) 311300 11-1111111 Number, street, and room or suite no. If a P.O. box, see instructions. E Date incorporated 45 Avenue A City or town State Foreign country name 1/15/2007 ZIP code TX Dime Box 77853 Foreign province/state/county F Total assets (see instructions) Foreign postal code C Check if Sch. M-3 attached H Check if: (1) 0 $ G Is the corporation electing to be an S corporation beginning with this tax year? Final return (2) Name change (3) Address change Yes (4) X No If "Yes," attach Form 2553 if not already filed Amended return (5) S election termination or revocation I Enter the number of shareholders who were shareholders during any part of the tax year . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . Tax and Payments Deductions (see instructions for limitations) Income Caution. Include only trade or business income and expenses on lines 1a through 21. See the instructions for more information. 1a b c 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22a b c 23a b c d 24 25 26 27 Gross receipts or sales . . . . . . . . . . . . . . . . . . . . . . 1a . . . . 2,400,000 . . . . . . . . . . . . . . . . . . . Returns and allowances . . . . . . . . . . . . . . . . . . . . . 1b . . . . . . . . . . . . . . . . . . . . . . . Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1c . . . . . . . . . . . . . . . . . 2,400,000 Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . . .736,741 . . . . . . . . Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . 1,663,259 . . . . . . . . . Net gain (loss) from Form 4797, line 17 (attach Form 4797) . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . Other income (loss) (see instructionsattach statement) . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . Total income (loss). Add lines 3 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . .6 . . . . . . . 1,663,259 . . . . . . . . . Compensation of officers (see instructions attach Form 1125-E) . . . . . . . . . . . . . . . . . . 7 . . . . . . . .150,000 . . . . . . . . Salaries and wages (less employment credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442,103 . . . . . 8 . . . . Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 . . . . . . . .216,106 . . . . . . . . Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . . Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 . . . . . . . . 40,000 . . . . . . . . . Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . .65,101 . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13. . . . . . . . 25,222. . . . . . . . Depreciation not claimed on Form 1125-A or elsewhere on return (attach Form 4562) . . . . . . . . . .14 . . . . . . . 15,254. . . . . . . . . Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 . . . . . . . .30,000 . . . . . . . . Pension, profit-sharing, etc., plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 . . . . . . . . . . . . . . . . Employee benefit programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18. . . . . . . . . . . . . . . . Other deductions (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . . . . . . 49,899 . . . . . . . . Total deductions. Add lines 7 through 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 . . . . . . 1,033,685 . . . . . . . Ordinary business income (loss). Subtract line 20 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . .629,574 . . . . . 21 . . . Excess net passive income or LIFO recapture tax (see instructions) . . . . 22a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax from Schedule D (Form 1120S) . . . . . . . . . . . . . . . . 22b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add lines 22a and 22b (see instructions for additional taxes) . . . . . . . . . . . . .. . .. .. . . . . . . . . .22c . . . . . . . . . . 0. . . . . . 2013 estimated tax payments and 2012 overpayment credited to 2013 . . . 23a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax deposited with Form 7004 . . . . . . . . . . . . . . . . . . 23b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit for federal tax paid on fuels (attach Form 4136) . . . . . . . . . 23c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add lines 23a through 23c . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .. . . ..23d. . . . . . . .. .. . . . . . . . . . . . .. 0 Estimated tax penalty (see instructions). Check if Form 2220 is attached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Amount owed. If line 23d is smaller than the total of lines 22c and 24, enter amount owed . . . . . . . . 25 . . . . . . . . . . 0 . . . . . . Overpayment. If line 23d is larger than the total of lines 22c and 24, enter amount overpaid . . . . . . . .26 . . . . . . . . . . 0. . . . . . Enter amount from line 26 Credited to 2014 estimated tax Refunded 27 0 Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Sign Here Paid Preparer Use Only with the preparer shown below (see instructions)? Yes Signature of officer Print/Type preparer's name Date Preparer's signature Date Check if self-employed SELF-PREPARED RETURN PTIN Firm's EIN Firm's address For Paperwork Reduction Act Notice, see separate instructions. No Title Firm's name City HTA May the IRS discuss this return Phone no. State ZIP code Form 1120S (2013) Form 1120S (2013) Schedule B 1 Chocolat Inc - Pahel 11-1111111 Other Information (see instructions) Check accounting method: a Cash b Page 2 Yes No X Accrual c Other (specify) 2 See the instructions and enter the: a Business activity Manufacturer b Product or service Candy 3 At any time during the tax year, was any shareholder of the corporation a disregarded entity, a trust, an estate, or a nominee or similar person? If "Yes," attach Schedule B-1, Information on Certain Shareholders of an S Corporation . . . . . . . . . . X. . . . . . 4 At the end of the tax year, did the corporation: a Own directly 20% or more, or own, directly or indirectly, 50% or more of the total stock issued and outstanding of any foreign or domestic corporation? For rules of constructive ownership, see instructions. If "Yes," complete (i) through (v) below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . (i) Name of Corporation (ii) Employer Identification Number (if any) (iii) Country of Incorporation (iv) Percentage of Stock Owned (v) If Percentage in (iv) is 100%, Enter the Date (if any) a Qualified Subchapter S Subsidiary Election Was Made b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a X trust? For rules of constructive ownership, see instructions. If "Yes," complete (i) through (v) below . . . . . . . . . . . . . . . . . . . . . . (i) Name of Entity (ii) Employer Identification Number (if any) (iii) Type of Entity (iv) Country of Organization (v) Maximum Percentage Owned in Profit, Loss, or Capital 5 a At the end of the tax year, did the corporation have any outstanding shares of restricted stock? . . . . . . . . . . . . . . . . . . X . . . . . . If "Yes," complete lines (i) and (ii) below. (i) Total shares of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Total shares of non-restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X b At the end of the tax year, did the corporation have any outstanding stock options, warrants, or similar instruments? . . . . . . . . . . . . . . . If "Yes," complete lines (i) and (ii) below. (i) Total shares of stock outstanding at the end of the tax year (ii) Total shares of stock outstanding if all instruments were executed 6 Has this corporation filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide information on any reportable transaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . 7 Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . . . . . . . . . . . . . . . . . . If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. 8 If the corporation: (a) was a C corporation before it elected to be an S corporation or the corporation acquired an asset with a basis determined by reference to the basis of the asset (or the basis of any other property) in the hands of a C corporation and (b) has net unrealized built-in gain in excess of the net recognized built-in gain from prior years, enter the net unrealized built-in gain reduced by net recognized built-in gain from prior years(see instructions) . . . . . . . . . . . . . . . . . . . . . . $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10 Enter the accumulated earnings and profits of the corporation at the end of the tax year. $ Does the corporation satisfy both of the following conditions? a The corporation's total receipts (see instructions) for the tax year were less than $250,000 . . . . . . . . . . . . . . . . . . . . . . . . . . b The corporation's total assets at the end of the tax year were less than $250,000 . . . . . . . . . . . . . . . . . . . . . . . .X . . . . . If "Yes," the corporation is not required to complete Schedules L and M-1. 11 During the tax year, did the corporation have any non-shareholder debt that was canceled, was forgiven, or had the terms modified so as to reduce the principal amount of the debt? X If "Yes," enter the amount of principal reduction $ 12 During the tax year, was a qualified subchapter S subsidiary election terminated or revoked? If "Yes," see instructions . . . . . . . . X 13 a Did the corporation make any payments in 2013 that would require it to file Form(s) 1099? . . . . . . . . . . . . . . . . . . . b If "Yes," did the corporation file or will it file required Forms 1099? . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . Form . X. . . . . . . . . . . . . . . . . . . 1120S (2013) Form 1120S (2013) Chocolat Inc - Pahel 11-1111111 Shareholders' Pro Rata Share Items Page 3 Total amount Ordinary business income (loss) (page 1, line 21) . . . . . . . . . . . . . . . . . . . . . 1. . . . . .629,574 . . . . . . . . . . Net rental real estate income (loss) (attach Form 8825) . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . Other gross rental income (loss) . . . . . . . . . . . . . . . 3a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses from other rental activities (attach statement) . . . . . . 3b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other net rental income (loss). Subtract line 3b from line 3a . . . . . . . . . . . . . . . . . 3c . . . . . . . .0 . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000. . . . . . . . 4 . . . Dividends: a Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5a . . . . . . . . . . . . . . . . b Qualified dividends . . . . . . . . . . . . . . . 5b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . 7 Net short-term capital gain (loss) (attach Schedule D (Form 1120S)) . . . . . . . . . . . . . . 7 . . . . . . . . . . . . . . . . 8a Net long-term capital gain (loss) (attach Schedule D (Form 1120S)) . . . . . . . . . . . . . . 8a . . . . . . . . . . . . . . . . . b Collectibles (28%) gain (loss) . . . . . . . . . . . . . . . . .8b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c Unrecaptured section 1250 gain (attach statement) . . . . . . . . 8c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Net section 1231 gain (loss) (attach Form 4797) . . . . . . . . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . . 1 2 3a b c 4 5 10 11 12a b c d Other income (loss) (see instructions) . . . . Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 179 deduction (attach Form 4562) . . . . . . . . . . . . . . . . . . . . . . . .11 . . . . . . . . . . . . . . . . Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12a . . . . . 20,000 . . . . . . . . . . . . Investment interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12b . . . . . . . . . . . . . . . . . Section 59(e)(2) expenditures (1) Type (2) Amount 12c(2) Other deductions (see instructions) . . . . . . Type . . . . . . . . . . . . . . . . . . .12d . . . . . . . . . . . . . . . . . . 13a b c d e f g Low-income housing credit (section 42(j)(5)) . . . . . . . . . . . . . . . . . . . . . . .13a . . . . . . . . . . . . . . . . Low-income housing credit (other) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13b. . . . . . . . . . . . . . . . . Qualified rehabilitation expenditures (rental real estate) (attach Form 3468) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13c Other rental real estate credits (see instructions) . . Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13d Other rental credits (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . 13e. . . . . . . . . . . . . . . . Type . Biofuel producer credit (attach Form 6478) . . . . . . . . . . . . . . . . . . . . . . . 13f . . . . . . . . . . . . . . . . . Other credits (see instructions) . . . . . . . . . Type . . . . . . . . . . . . . . . . . 13g . . . . . . . . . . . . . . . . . . . Alternative Minimum Tax (AMT) Items 14a Name of country or U.S. possession b Gross income from all sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14b. . . . . . . . . . . . . . . . . c Gross income sourced at shareholder level . . . . . . . . . . . . . . . . . . . . . . . 14c. . . . . . . . . . . . . . . . . Foreign gross income sourced at corporate level d Passive category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14d . . . . . . . . . . . . . . . . . e General category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14e . . . . . . . . . . . . . . . . . f Other (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14f . . . . . . . . . . . . . . . . Deductions allocated and apportioned at shareholder level g Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14g h Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14h. . . . . . . . . . . . . . . . . Deductions allocated and apportioned at corporate level to foreign source income i Passive category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14i . . . . . . . . . . . . . . . . j General category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14j . . . . . . . . . . . . . . . . . k Other (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14k. . . . . . . . . . . . . . . . Other information l Total foreign taxes (check one): Paid Accrued . . . . . . . . . . . . . . 14l . . . . . . . . . . . . . . . . m Reduction in taxes available for credit (attach statement) . . . . . . . . . . . . . . . . . .14m . . . . . . . . . . . . . . . . n Other foreign tax information (attach statement) 15a b c d e f Post-1986 depreciation adjustment . . . . . . . Adjusted gain or loss . . . . . . . . . . . . . Depletion (other than oil and gas) . . . . . . . . Oil, gas, and geothermal propertiesgross income . Oil, gas, and geothermal propertiesdeductions . . Other AMT items (attach statement) . . . . . . . Items Affecting Shareholder Basis Foreign Transactions Credits Deductions Income (Loss) Schedule K . . . . . . . . . . . . . . . . . . . . . . . . 16a b c d e Tax-exempt interest income . . . . . . . . . . . . . Other tax-exempt income . . . . . . . . . . . . . . Nondeductible expenses . . . . . . . . . . . . . . Distributions (attach statement if required) (see instructions) . Repayment of loans from shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15a . . . 15b . . . . 15c . . . . 15d . . . . 15e . . . 15f . . . . . . . . . . 16a. . . 16b. . . 16c . . . 16d. . . 16e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form . . . . . . . . . . . . . . . . . . . . . . . . .10,000 . . . . . . . . 15,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1120S (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form 1120S (2013) Reconciliation Other Information Schedule K Chocolat Inc - Pahel Shareholders' Pro Rata Share Items (continued) 4 b Investment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17b . . . . . . . . . . . . . . . . . . c Dividend distributions paid from accumulated earnings and profits . . . . . . . . . . . . . 17c . . . . . .100,000 . . . . . . . . . . . d Other items and amounts (attach statement) 18 Income/loss reconciliation. Combine the amounts on lines 1 through 10 in the far right column. From the result, subtract the sum of the amounts on lines 11 through 12d and 14l . . . . 18 . . . . . 709,574 . . . . . . . . . . . . Balance Sheets per Books Assets 16 17 18 19 20 21 22 23 24 25 26 27 Page Total amount 17a Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17a . . . . . 100,000 . . . . . . . . . . . Schedule L 1 2a b 3 4 5 6 7 8 9 10a b 11a b 12 13a b 14 15 11-1111111 Beginning of tax year (a) End of tax year (b) (c) (d) Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47,840 . . . . . . . . . . . . . .245,642 . . . . . . . . . . . Trade notes and accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,104 . . . . . . . . . . . . . . 93,100 . . . . Less allowance for bad debts . . . . . . . . . . . . . . . . . . . . . . . 93,100 . . . . . . . . . . . . . . 123,104 . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,607 . . . . . . . . . . . . . . . 3,467 . . . . . . . . . . U.S. government obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax-exempt securities (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets (attach statement) . . . . . . . . . . . . . . . . . . . .8,333 . . . . . . . . . . . . . . .17,582 . . . . . . . . . . Loans to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage and real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and other depreciable assets . . . . . . . . . 138,203 . . . . . . . . . . . . . . . 185,348 . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . 84,235 . . . . . . 53,968 . . . . . . 85,859. . . . . . . . . . . . . . . . . . . . . . . Depletable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depletion . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . . . . . . . . . .0 . . . . . . Land (net of any amortization) . . . . . . . . . . . . . . . . . . . . . . . 2,000 . . . . . . . . . . . . . . . 2,000 . . . . . . . . . . . Intangible assets (amortizable only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . 0. . . . . . . . . . . . . . . . . 0 . . . . . . Other assets (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,848 . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities and Shareholders' Equity Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .42,500 . . . . . . . . . . . . . . 72,300 . . . . . . . . . . . Mortgages, notes, bonds payable in less than 1 year . . . . . . . . . . . . . . . . . . 4,500 . . . . . . . . . . . . . . . 2,100. . . . . . . . . . . Other current liabilities (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans from shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgages, notes, bonds payable in 1 year or more . . . . . . . . . . . . . . . . . . 26,700 . . . . . . . . . . . . . . . 24,300 . . . . . . . . . . . Other liabilities (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 . . . . . . . . . . . . . . 30,000 . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,148. . . . . . . . . . . . . . 704,574 . . . . . . . . . . . . Adjustments to shareholders' equity (attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less cost of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833,274 . . . . . . . . . 214,848 Form 1120S (2013) Form 1120S (2013) Schedule M-1 Chocolat Inc - Pahel Reconciliation of Income (Loss) per Books With Income (Loss) per Return 11-1111111 Page 5 Note. Schedule M-3 required instead of Schedule M-1 if total assets are $10 million or moresee instructions 1 2 3 Net income (loss) per books . . . . . . . . . . . . . 704,574 .5 . . Income.recorded on books this year not included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income included on Schedule K, lines 1, 2, 3c, 4, on Schedule K, lines 1 through 10 (itemize): 5a, 6, 7, 8a, 9, and 10, not recorded on books this a Tax-exempt interest $ 10,000 year (itemize): Expenses recorded on books this year not included on Schedule K, lines 1 through 12 and 14l (itemize): a Depreciation $ b Travel and entertainment $ 10,000 6 Deductions included on Schedule K, lines 1 through 12 and 14l, not charged against book income this year (itemize): a Depreciation $ 0 15,000 7 Add lines 5 and 6 . . . . . . . . . . . . . . . . . 10,000. . . . . . 4 Add lines 1 through 3 . . . . . . . . . . . . . . . . 719,574 8 . . Income (loss). (Schedule K,.line. 18). Line . less line . . . . . . . . . . . . . . . . . . . 709,574. . . . . . . . . . . . . . . . . . . . 4 . . 7 .. .. .. . Schedule M-2 Analysis of Accumulated Adjustments Account, Other Adjustments Account, and Shareholders' Undistributed Taxable Income Previously Taxed (see instructions) See Attached Statement 15,000 (a) Accumulated adjustments account 1 2 3 4 5 6 7 8 (b) Other adjustments account (c) Shareholders' undistributed taxable income previously taxed Balance at beginning of tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ordinary income from page 1, line 21 . . . . . . . . . . . . . . . 629,574 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other additions . . . . . . . . . . . . . . . . . . . . . . . . 100,000 . . . . . . . . . 10,000 . . . . . . . . . . . . . . . . . . . . . . . Loss from page 1, line 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other reductions . . . . . . . . . . . . . . . . . . . . . . . . 35,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combine lines 1 through 5 . . . . . . . . . . . . . . . . . . . .694,574 . . . . . . . . . . 10,000 . . . . . . . . . . . . 0. . . . . . . . . . Distributions other than dividend distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at end of tax year. Subtract line 7 from line 6 . . . . . . . . . . . . . 694,574 . . . . . . . . . . 10,000 . . . . . . . . . . . . 0 . . . . . . . . . . Form 1120S (2013) 671113 Final K-1 Schedule K-1 (Form 1120S) Part III Department of the Treasury Internal Revenue Service Amended K-1 Shareholder's Share of Current Year Income, Deductions, Credits, and Other Items 1 Other net rental income (loss) Interest income Ordinary dividends 5b Qualified dividends 6 Royalties 7 Net short-term capital gain (loss) 8a Net long-term capital gain (loss) 8b Collectibles (28%) gain (loss) 8c Unrecaptured section 1250 gain 9 Net section 1231 gain (loss) 10 Shareholder's Share of Income, Deductions, See back of form and separate instructions. Credits, etc. A 3 4 , 20 Information About the Corporation Corporation's employer identification number Other income (loss) 13 Credits 14 Foreign transactions 15 Alternative minimum tax (AMT) items 440,702 , 2013 ending Part I Net rental real estate income (loss) 5a year beginning Ordinary business income (loss) 2 For calendar year 2013, or tax OMB No. 1545-0130 70,000 11-1111111 B Corporation's name, address, city, state, and ZIP code Chocolat Inc - Pahel 45 Avenue A Dime Box, TX 77853 C IRS Center where corporation filed return Ogden, UT 84201-0013 Part II D Information About the Shareholder Shareholder's identifying number Shareholder: 1 123-45-6781 E Shareholder's name, address, city, state, and ZIP code Dane Henderson 545 Avenue C Dime Box, TX 77853 F Shareholder's percentage of stock ownership for tax year . . . . . . . . . . . . . 70.000000% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 179 deduction 12 16 Items affecting shareholder basis Other deductions A 14,000 For IRS Use Only A 7,000 C 10,500 17 Other information A 70,000 * See attached statement for additional information. For Paperwork Reduction Act Notice, see Instructions for Form 1120S. HTA IRS.gov/form1120s Schedule K-1 (Form 1120S) 2013 Dane Henderson 123-45-6781 K-1 Statement (Sch K-1, Form 1120S) Line 12 - Deductions A Code A - Cash contributions (50%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . A . . . . 14,000 . . . . . . . . . Line 16 - Items affecting shareholder basis A Code A - Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. . . . . 7,000 . . . . . . . . C Code C - Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C . . . . 10,500. . . . . . . . . Line 17 - Other Information A Code A - Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 . . . . . A . . . 671113 Final K-1 Schedule K-1 (Form 1120S) Part III Department of the Treasury Internal Revenue Service Amended K-1 Shareholder's Share of Current Year Income, Deductions, Credits, and Other Items 1 Other net rental income (loss) Interest income Ordinary dividends 5b Qualified dividends 6 Royalties 7 Net short-term capital gain (loss) 8a Net long-term capital gain (loss) 8b Collectibles (28%) gain (loss) 8c Unrecaptured section 1250 gain 9 Net section 1231 gain (loss) 10 Shareholder's Share of Income, Deductions, See back of form and separate instructions. Credits, etc. A 3 4 , 20 Information About the Corporation Corporation's employer identification number Other income (loss) 13 Credits 14 Foreign transactions 15 Alternative minimum tax (AMT) items 188,872 , 2013 ending Part I Net rental real estate income (loss) 5a year beginning Ordinary business income (loss) 2 For calendar year 2013, or tax OMB No. 1545-0130 30,000 11-1111111 B Corporation's name, address, city, state, and ZIP code Chocolat Inc - Pahel 45 Avenue A Dime Box, TX 77853 C IRS Center where corporation filed return Ogden, UT 84201-0013 Part II D Information About the Shareholder Shareholder's identifying number Shareholder: 2 123-45-6782 E Shareholder's name, address, city, state, and ZIP code Jace McClean F Shareholder's percentage of stock ownership for tax year . . . . . . . . . . . . . 30.000000% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 179 deduction 12 16 Items affecting shareholder basis Other deductions A 6,000 For IRS Use Only A 3,000 C 4,500 17 Other information A 30,000 * See attached statement for additional information. For Paperwork Reduction Act Notice, see Instructions for Form 1120S. HTA IRS.gov/form1120s Schedule K-1 (Form 1120S) 2013 Jace McClean 123-45-6782 K-1 Statement (Sch K-1, Form 1120S) Line 12 - Deductions A Code A - Cash contributions (50%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . A . . . . .6,000 . . . . . . . . Line 16 - Items affecting shareholder basis A Code A - Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. . . . . 3,000 . . . . . . . . C Code C - Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C . . . . 4,500. . . . . . . . . Line 17 - Other Information A Code A - Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 . . . . . A . . . Form 1125-A Cost of Goods Sold (Rev. December 2012) Department of the Treasury Internal Revenue Service OMB No. 1545-2225 Attach to Form 1120, 1120-C, 1120-F, 1120S, 1065, or 1065-B. Information about Form 1125-A and its instructions is at www.irs.gov/form1125a. Name Employer identification number Chocolat Inc - Pahel 11-1111111 Inventory at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . . . . 9,607 . . . . . . . . . Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . 278,143 . . . . . . . . . . . Cost of labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . 203,102 . . . . . . . . . . . Additional section 263A costs (attach schedule) . . . . . . . . . . . . . . . . . . . . . . . .4 . . . . . . . .264,610 . . . . . . . . . . Other costs (attach schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . -15,254. . . . . . . . . . Total. Add lines 1 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . 740,208 . . . . . . . . . . Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . . . . . 3,467 . . . . . . . . . Cost of goods sold. Subtract line 7 from line 6. Enter here and on Form 1120, page 1, line 2 or the appropriate line of your tax return (see instructions) . . . . . . . . . . . . . . . . . . . .8 . . . . . . . .736,741 . . . . . . . . . . 9 a Check all methods used for valuing closing inventory: 1 2 3 4 5 6 7 8 (i) Cost (ii) X Lower of cost or market (iii) Other (Specify method used and attach explanation.) b Check if there was a writedown of subnormal goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c Check if the LIFO inventory method was adopted this tax year for any goods (if checked, attach Form 970) . . . . . . . . . . . . . . . . . . d If the LIFO inventory method was used for this tax year, enter amount of closing inventory computed under LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9d e If property is produced or acquired for resale, do the rules of section 263A apply to the entity (see instructions)? . . . X. Yes . . . . No . . . . . . . . f Was there any change in determining quantities, cost, or valuations between opening and closing inventory? If X . "Yes," attach explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes . . . . No . . . . . . . For Paperwork Reduction Act Notice, see instructions. HTA Form 1125-A (Rev. 12-2012) Chocolat Inc - Pahel 11-1111111 Line 19 (1120S) - Other Deductions 1 Other Deductions 1 49,899 2 Total other deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . 49,899 . . . . . . . . . Line 12a, Sch K (1120S) - Contributions A Code A - Cash contributions (50%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A . . . . 20,000 . Total contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12a . . . . 20,000 . . . . . . . . . Line 6, Sch L (1120S) - Other Current Assets Beginning End 1 Prepaid Expenses 1 8,333 17,582 2 Total other current assets . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . 8,333 . . . . . .17,582 . . . . . . . . . Line 3, Sch M-1 (1120S) - Expenses on Books Not on Sch K, lines 1 through 12 and 14l 1 Payroll Penalties 1 15,000 2 Total expenses on books not on Sch K, lines 1 through 12 and 14l . . . . . . . . . . . . . . . . . 2 . . . . 15,000 . . . . . . . . . Line 4 (1125-A) - Additional Section 263A Costs for Cost of Goods Sold 1 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . . . 15,254. . . . . . . . 2 Other Direct Costs 2 249,356 3 Total additional section 263A costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . 264,610 . . . . . . . . . . Line 5 (1125-A) - Other Costs for Cost of Goods Sold 1 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . . -15,254. . . . . . . . . 2 Total other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . -15,254 . . . . . . . . . 3 Total other costs less expenses for offsetting credits . . . . . . . . . . . . . . . . . . . . . . 3 . . . . -15,254 . . . . . . . . . 2013 CCH Small Firm Services. All rights reserved. Chocolat Inc - Pahel 11-1111111 Line 7 (1120S) - Compensation of Officers First Name 1 2 Dane Jace M.I. Last Name Henderson McClean Suffix Address 545 Avenue C City Dime Box State Zip TX 77853 Foreign Country Social Security Number 123-45-6781 123-45-6782 % of Time Devoted to Business 100.00% 100.00% % of Stock Owned 70.00% 30.00% Officer Title Check if Officer is a Shareholder X X Amount of Compensation 105,000 45,000 Total compensation of shareholder officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . .. . . . . . . . . . 150,000 . . . . . Total compensation of other officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . . . . . .. . . . . . . . . 0 . . Less amounts included in cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . . . . . . . 0. . Less employment credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . .. . . . . . . . . . . . . . . Total officer compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 150,000. . . . . Chocolat Inc - Pahel 11-1111111 Line 8 (1120S) - Salaries and Wages 1 Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . . . .0 . . . . . . . . . . . . . 2 Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . 442,103. . . . . . . . . . . . . . . . . 3 3 4 Total salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . 442,103. . . . . . . . . Salaries and wages reported elsewhere on return: 5 Amounts included in Cost of Goods Sold . . . . . . . . . . . . . . . . . . . 5 . . . . . . 0 . . . . . . . . . . . . . . . 6 Elective contributions to a section 401(k) cash or deferred arrangement, or amounts contributed under a salary reductions SEP agreement or a SIMPLE IRA plan . . . . . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . 7 Total salaries and wages reported elsewhere on return . . . . . . . . . . . . . . . . . . . . . . 7 . . . . . . . 0 . . . . . Less employment credits: 8 From Form 5884 - Work Opportunity Credit . . . . . . . . . . . . . . . . . .8 . . . . . . .0 . . . . . . . . . . . . . 9 From Form 8844 - Empowerment Zone Employment Credit . . . . . . . . . . . 9 . . . . . . 0 . . . . . . . . . . . . . . . 10 From Form 8845 - Indian Employment Credit . . . . . . . . . . . . . . . . .10 . . . . . . 0. . . . . . . . . . . . . . . 11 11 12 12 13 13 14 Total employment credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 . . . . . . 0. . . . . . . 15 Reduction of expenses for offsetting credits . . . . . . . . . . . . . . . . . . . . . . . . . . 15 . . . . . . . . . . . . . 16 Total salaries and wages less employment credits and expense reductions . . . . . . . . . . . . . .16 . . . 442,103 . . . . . . . . . Line 12 (1120S) - Taxes and Licenses 1 Taxes 1 65,101 2 Sub Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . 65,101 . . . . . . . . 3 Total taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . 65,101 . . . . . . . . . Line 14 (1120S) - Depreciation 1 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Depreciation claimed on 1125-A and elsewhere on return . . . . . . . . . . . . . . . . . . . . 2 . . . . . . 0 . . . . . . . 3 Depreciation not claimed on 1125-A and elsewhere on return . . . . . . . . . . . . . . . . . . . 3 . . . . .15,254 . . . . . . . Lines 4, 5a, and 5b, Sch K (1120S) - Interest and Dividends Interest income (line 4) 1 Corporate Bond Interest 1 100,000 2 Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . 100,000 . . . . . . . . . . Line 16c, Sch K (1120S) - Nondeductible Expenses C Code C - Nondeductible expenses Payroll Penalties 15,000 Total nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000. . . . . . 16c . . Line 17a, Sch K (1120S) - Investment Income A Code A - Investment income 1 Investment income from lines 4, 5a, 6 and 10, Schedule K, Form 1120S . . . . . . 1 . . . .100,000 . . . . . . . . . . . . . . . . . 2 Income included on lines 4, 5a, 6 and 10 that is NOT investment income . . . . . . 2. . . . . . . . . . . . . . . . . . . . . 3 Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . 100,000 . . . . . . . . 4 4 5 5 Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17a . . . .100,000 . . . . . . . . . Chocolat Inc - Pahel 11-1111111 Sch L (1120S) - Balance Sheets per Books Assets Beginning Ending 1 2a 2b 2c 3 4 5 6 7 8 9 10a 10b 10c 11a 11b 11c 12 13a 13b 13c 14 15 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . . . 47,840. . . . . 245,642 . . . . . . . . . . . Trade notes and accounts receivable . . . . . . . . . . . . . . . . . . . 2a . . . . 93,100 . . . . . 123,104 . . . . . . . . . . . . Less allowance for bad debts . . . . . . . . . . . . . . . . . . . . . . 2b . . . . . . . . . . . . . . . . . . . . . Net trade notes and accounts receivable . . . . . . . . . . . . . . . . . . 2c . . . . 93,100 . . . . . 123,104 . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 . . . . . 9,607 . . . . . . 3,467 . . . . . . . . . . U.S. government obligations . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . Tax-exempt securities . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 6. . . . . 8,333. . . . . . 17,582. . . . . . . . . . Loans to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . .7 . . . . . . . . . . . . . . . . . . . . . Mortgage and real estate loans . . . . . . . . . . . . . . . . . . . . . .8 . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . . . . . . 0 . . . . . . . . 0. . . . . . Buildings and other depreciable assets . . . . . . . . . . . . . . . . . . 10a . . . 138,203 . . . . . 185,348 . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . 10b . . . . . . . . . . . .85,859 . . . . . . . . 84,235 . . Net buildings and other depreciable assets . . . . . . . . . . . . . . . . .10c . . . . 53,968 . . . . . 99,489 . . . . . . . . . . . . Depletable assets . . . . . . . . . . . . . . . . . . . . . . . . . . 11a . . . . . . . . . . . . . . . . . . . . . . Less accumulated depletion . . . . . . . . . . . . . . . . . . . . . . 11b . . . . . . . . . . . . . . . . . . . . . . Net depletable assets . . . . . . . . . . . . . . . . . . . . . . . . . 11c. . . . . . . . . . . . . . .0 . . . . . . 0 Land (net of any amortization) . . . . . . . . . . . . . . . . . . . . . . 12 . . . . 2,000 . . . . . .2,000 . . . . . . . . . . . Intangible assets (amortizable only) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0. . . . . . . . 0. . . . . . 13a Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . 13b . . . . . . 0 . . . . . . . . 0 . . . . . . . . Net intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . 13c . . . . . . 0 . . . . . . . . 0 . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 . . . . . . 0. . . . . . . . 0 . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 . . . .214,848 . . . . .491,284 . . . . . . . . . . . . 16 17 18 19 20 21 22 23 24 25 26 27 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 . . . . 42,500. . . . . . 72,300 . . . . . . . . . . . Mortgages, notes, bonds payable in less than 1 year . . . . . . . . . . . . . . . . . . . 4,500 . . . . . . 2,100 . . . . . . 17 . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . 0 . . . . . . . 0 . . . . . . . . Loans from shareholders . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . . . . . . . . . . . . . . . . . . . Mortgages, notes, bonds payable in 1 year or more . . . . . . . . . . . . . . 20 . . . . 26,700 . . . . . 24,300 . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 . . . . . . 0 . . . . . . . 0 . . . . . . . . Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 . . . . 30,000. . . . . . 30,000. . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 23 . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .24. . . . 111,148 . . . . . 704,574. . . . . . . . . . . . Adjustments to shareholders' equity . . . . . . . . . . . . . . . . . . . .25 . . . . . . 0. . . . . . . . 0. . . . . . . Less cost of treasury stock . . . . . . . . . . . . . . . . . . . . . . . 26 . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . 27 . . . .214,848 . . . . . 833,274 . . . . . . . . . . . . Liabilities and Capital End of year balance sheet out of balance by . . . . . . . . . . . . . . . . . . . . . . . . . . . . -341,990. . . . . . . . . Chocolat Inc - Pahel 11-1111111 Sch M-2 (1120S) - Retained Earnings Accumulated Adjustments Account 1 2 3 4 5 6 7 8 Other Adjustments Account Shareholders' Undistributed Taxable Income Previously Taxed Retained Earnings Unappropriated/ Timing Differences Total Retained Earnings Balance at beginning of tax year 1 0 Income from page 1, line 21 . . 2 . . . 629,574 . . . . . . . . . . . . . . . . . . . . . . . . . . 629,574 . . . . . . . . . . . . . Other additions . . . . . . . 3 . . . 100,000 . . . . . 10,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 Loss from page 1, line 21 . . . 4 . . . . . . 0. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . . . Other reductions . . . . . . . 5 . . . . 35,000 . . . . . . .0 . . . . . . . . . . . . . . . . . . . 35,000 . . . . . . . . . . . . Combine lines 1 through 5 . . . 6. . . . 694,574 . . . . .10,000 . . . . . . . 0 . . . . . . . . . . . 704,574 . . . . . . . . . . . . 0 . . . Distributions . . . . . . . . .7 . . . . . . 0. . . . . . . 0 . . . . . . . 0 . . . . . . . . . . . . . . 0 . . . . . . . Balance at end of tax year . . . .8 . . . 694,574. . . . . 10,000 . . . . . . . 0 . . . . . . . 0. . . . .704,574 . . . . . . . . . . . . . . Chocolat Inc - Pahel 11-1111111 Sch M-2, Lines 3 and 5 (1120S) - Other Additions and Reductions (a) Accumulated (b) Other adjustments account adjustments account Line 3 - Other additions 1 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 . . . . 100,000 . . . . . . . . . . . . . . . . 2 Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . .2 . . . . . . . . . . . . .10,000. . . . . . . 3 Total other additions. Enter on line 3, Schedule M-2 . . . . . . . . . . . . . . .3 . . . . 100,000 . . . . . .10,000 . . . . . . . . . . Line 5 - Other reductions 1 Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . 20,000 . . . . . . . . . . . . . . . . . 2 Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . .15,000. . . . . . . . . . . . . . . . 3 Total other reductions. Enter on line 5, Schedule M-2 . . . . . . . . . . . . . . 3. . . . . 35,000. . . . . . . . 0 . . . . . . . . Dane Henderson (123-45-6781) and Jace McClean (123-45-6782) are 70% and 30% owners, respectively, of Chocolat, Inc. (11-1111111), a candy company located at 45 Avenue A, Dime Box, TX 77853. The following information was taken from the Chocolat income statement for 2011. Tax Exempt interest income $ 10,000 Interest-income, corporate bonds 100,000 Gross sales receipts 2,400,000 Beginning Inventory 9,607 Direct labor 203,102 Direct materials purchased 278,143 Direct other costs 249,356 Ending inventory 3,467 Salaries and wages 442,103 Officers' salaries 150,000 Repairs 216,106 Depreciation 15,254 Interest Expense 25,222 Rent expense (operating) 40,000 Taxes 65,101 Charitable contributions (cash) 20,000 Advertising expense 30,000 Payroll penalties 15,000 Other deductions 49,899 Net income 704,574 A company balance sheet appears below. Cash Accounts receivable Inventories Prepaid expenses Building and Equipment Accumulated depreciation Land Total Assets Accounts Payable Notes payable (less than 1 year) Notes payable (more than 1 year) Capital Stock Retained earnings Total liabilities and capital January 1, 2011 $ 47,840 93,100 9,607 8,333 138,203 (84,235) 2,000 $214,848 December 31, 2011 ??? 123,104 3,467 17,582 185,348 ?? 2,000 $844,422 $ 42,500 $ 72,300 4,500 26,700 30,000 111,148 $214,148 2,100 24,300 30,000 ? $844,422 Chocolat's accounting firm provided the following additional information. Distributions to shareholders total $100,000 The company's S corporation election was made on January 15, 2007 Using the above information, prepare and compete form 1120S and a Schedule K-1 for Dane Henderson, 545 Avenue C, Dime Box TX 77853. If any information is missing, make realistic assumptions and list them