Prepare Schedule M-3 and Schedule L Form 990.

Prepare Schedule M-3 and L Form 990.

PROBLEM 3C CORPORATION (FORM 1120) 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 Kingdom's 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. Janet's Social Security number is 123-45-6788, and Kim's Social Security number is 123-45-6787. Pet Kingdom is an accrual method, calendar year taxpayer. Inventories are deter- mined using FIFO and the lower of cost or market method. Pet Kingdom uses the straight-line method of depreciation for book purposes and accelerated deprecia- tion (MACRS) for tax purposes. . During 2019, the corporation distributed cash dividends of $250,000. Pet Kingdom's financial statements for 2019 are shown below. Income Statement Income Gross sales $5,750,000 Sales returns and allowances (200,000) Net sales $ 5,550,000 Cost of goods sold (2,300,000) Gross profit $3,250,000 Dividends received from stock investments in less-than-20%- owned U.S. corporations 43,750 Interest income: State bonds $ 15,000 Certificates of deposit 20,000 35,000 Total income $ 3,328,750 continued Expenses Salaries-officers: Janet Morton $ 262,500 Kim Wong 262,500 $525,000 Salaries-clerical and sales 725,000 Taxes (state, local, and payroll) 238,000 Repairs and maintenance 140,000 Interest expense: Loan to purchase state bonds $ 9,000 Other business loans 207,000 216,000 Advertising 58,000 Rental expense 109,000 Depreciation 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 (2,255,000) Net income before taxes $ 1,073,750 Federal income tax (221,734) Net income per books $ 852,016 "Depreciation for tax purposes is $135,000. 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 Balance Sheet Assets January 1, 2019 December 31, 2019 Cash $ 1,200,000 $ 1,039,461 Trade notes and accounts receivable 2,062,500 2,147,000 Inventories 2,750,000 3,030,000 Stock investment 1,125,000 1,125,000 State bonds 375,000 375,000 Certificates of deposit 400,000 400,000 Prepaid Federal tax 2,266 Buildings and other depreciable assets 5,455,000 5,455,000 Accumulated depreciation (606,000) (712,000) Land 812,500 812,500 Other assets 140,000 128,500 Total assets $13,714,000 $13,802,727 Liabilities and Equity January 1, 2019 December 31, 2019 Accounts payable $ 2,284,000 $ 1,840,711 Other current liabilities 175,000 155,000 Mortgages 4,625,000 4,575,000 Capital stock 2,500,000 2,500,000 Retained earnings 4,130,000 4,732,016 Total liabilities and equity $13,714,000 $13,802 727