Preparation of tax returns and related schedules can be very helpful in terms of integrating and applying tax concepts. To that end, 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. Please submit a hard copy of your solution with schedules and forms in proper attachment order (stapled or clipped) in class. Check figure: Taxable Income (line 28) = $1,439,250.

On November 17, 2001, Amber Leigh and Andrew Johns formed Dawson, Inc. to sell sporting goods. Pertinent information regarding Dawson, Inc. is summarized as follows:

Dawson Inc.s business address is 2120 Rebecca Lane, Great Falls, Montana 59401; its telephone number is (575) 541-1122; and its email address is dawson@dawson.com.

The employer identification number is 11-1111111, and the principal business activity code is 451110.

Andrew is president of the company, and Amber is vice president.

Andrew and Amber are full-time employees of Dawson, Inc. Andrews Social Security number is 123-45-6789, and Ambers Social Security number is 987-65-4321.

Dawson, Inc. is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Dawson, Inc. uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.

Dawson, Inc.s income statement for 2018 is shown on page 2.

Dawson, Inc.s balance sheet is as follows:

	January 1, 2018	December 31, 2018
Cash	1,200,000	1,250,000
Accounts receivable	2,062,500	2,247,000
Inventories	2,750,000	3,030,000
Stock investment	1,125,000	1,075,000
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	9,943,000	9,571,000
Accounts payable	2,284,000	1,970,780
Other current liabilities	175,000	155,000
Mortgages	4,625,000	4,575,000
Capital stock	1,500,000	1,500,000
Retained Earnings	1,359,000	1,370,220
Total liabilities and equity	9,943,000	9,571,000

The following additional information is found in the tax working papers:

Dividends were from Hager Corporation, a less-than-20%-owned domestic corporation.

Other income includes key officer life insurance proceeds of $200,000.

The capital gain resulted from the sale of Bulldog Enterprises stock. Dawson, Inc. purchased the Bulldog Enterprises stock on 3/2/2011 for $24,000. You can assume basis was reported to the IRS on a 1099-B.

The loss due to worthlessness of stock was due to the bankruptcy of CLL, Inc. The stock was purchased March 5, 2009. This also was reported on a 1099-B.

Purchases (for COGS) were $3,380,000.

Retained earnings are unappropriated.

All contributions were paid in cash during the current year to Great Falls University.

State income taxes for 2018 were $3,000 (included in the state, local, and payroll tax expense).

Actual bad debts for the year were $5,500.

The actual warranty outlay for the year was $7,250.

For tax purposes, depreciation amounted to $950,000.

Dawson, Inc. declared a $1,345,000 cash dividend during the current year.

During 2018, Dawson, Inc. made estimated tax payments of $80,000 each quarter to the IRS.

Salaries and wages includes $200,000 paid to Mr. Johns and Ms. Leigh ($100,000 each).

Income Statement
Income
Gross sales			6,900,000
Sales returns and allowances			(80,000)
Net sales			6,820,000
Cost of goods sold			(3,100,000)
Gross profit			3,720,000
Dividends			18,000
Interest income
State of Montana bonds	15,000
Certificates of deposit	27,500		42,500
Gain on sales of stock			8,000
Loss due to stock worthlessness			(27,000)
Other income			226,500
Total income			3,988,000
Expenses
Salaries and wages		805,000
Taxes (state, local, and payroll)		40,000
Interest expense
Loan to purchase Montana bonds	4,000
Funds borrowed for working capital	22,000	26,000
Warranty expense		9,300
Depreciation*		875,000
Charitable contributions		88,000
Premiums on key-man life insurance policies		10,000
Bad debt expense		9,800
Other expenses		435,000
Total expenses			(2,298,100)
Net income before taxes			1,689,900
Federal income tax			(333,680)
Net income per books			1,356,220