Prepare Schedules M-1, K, and K-1 for tax year 2018. See attached set of facts and tax forms.

Hints: There are five book-tax differences. Taxable income reconciliation is $115,550. Ordinary income is $122,650.

SCHEDULES K, M-1, AND K-1 TAX YEAR 2018 INCOME: GROSS RECEIPTS 825,000 COST OF GOODS SOLD (550,500) 7,600 QUALIFIED DIVIDEND INCOME 3,500 285,600 TAX-EXEMPT INCOME TOTAL INCOME EXPENSES: BOOK DEPRECIATION 12,800 SALARIES AND WAGES EXPENSE 90,000 POLITICAL CONTRIBUTIONS EXPENSE 2,000 RENT EXPENSE 12,000 STATE AND LOCAL TAXES 3,700 CHARITABLE CONTRIBUTIONS 6,500 INTEREST EXPENSE 6,700 BUSINESS INSURANCE EXPENSE 4,600 MEALS EXPENSE 4,500 SUPPLIES EXPENSE 3,100 TELEPHONE EXPENSE 4,100 UTILITIES EXPENSE 3,400 OFFICE EXPENSE 6,200 TOTAL EXPENSES 159,600 126,000 NET INCOME PER BOOKS OTHER INFORMATION: NEWPORT NEWS, INC. P.O. BOX 120 RUMFORD, RI 02916 EIN 23-6392101 BLAKE TURIN 50% OWNER ADDRESS: 1700 ADDISON DRIVE PROVIDENCE, RI 02903 SSN: 088-76-6301 TAX DEPRECIATION TOTAL 10,300 IRC SECTION 179 INCLUDED IN TAX DEPRECIATION 8,200 TOTAL CASH DISTRIBUTIONS TO SHAREHOLDERS (50% EACH) 60,000 ADVANCE PAYMENT TAXABLE IN 2017 INCLUDED IN BOOK INCOME IN 2018 13,700 Page 3 Fom 1120S (2018) Other Information (see instructions) (continued) Yes No Schedule B 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? If "Yes," enter the amount of principal reduction During the tax year, was a qualified subchapter S subsidiary election terminated or revoked? If "Yes," see instructions 14a Did the corporation make any payments in 2018 that would require it to file Formis) 10997. b f "Yes," did the corporation file or will it file required Forms 1099? 15 Is the corporation attaching Form 8996 to certify as a Qualitied Opportunity Fund? If "Yes," enter the amount from Form 8996, line 13 Schedule K Shareholders' Pro Rata Share Items 12 13 Total amount Ordinary business income (loss) (page 1, ine 21) 2 Net rental real estate income (loss) (attach Form 8825) 3a Other gross rental income (loss). b Expenses from other rental activities (attach statement) 3b e Other net rental income (loss). Subtract line 3b from line 3a Interest income. Dividends: a Ordinary dividends 5a b Qualified dividends. 5b Royalties. Net short-term capital gain (loss) (attach Schedule D (Form 1120S) 8a Ba Net long-term capital gain (loss) (attach Schedule D (Form 1120S) b Collectibles (28%) gain (loss). e Unrecaptured section 1250 gain (attach statement) Net section 1231 gain (loss) (attach Form 4797) Other income (loss) (see instructions) 8b 8c Type 10 10 11 11 Section 179 deduction (attach Form 4562) 12a 12a Charitable contributions b Investment interest expense Section 59e)(2) expenditures d 12b (1) Type (2) Amount 12o12 Other deductions (see instructions) Type 12d 13a Low-income housing credit (section 42015) 13a b Low-income housing credit (ather) Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) 13b 130 13d Other rental real estate credits (see instructions) Type d e Other rental credits (see instructions) 1 Biofuel producer oredit (attach Form 6478) 9 Other credits (see instructions) 14a Name of country or U.S. possession b Gross income from all sources Type 13e 13f Type 13g 14b O Gross inoome sourced at shareholder level Foreign gross income sourced at corporate level d Section 951A category. e Foreign branch category 1 Passive category 9 General category h Other (attach statement) Deductions allocated and apportioned at shareholder level Interest expense. 14c 14d 14e 141 14g 14h 14i 14 Other. Deductions allocated and apportioned at corporate level to foreign source income k Section 951A category I Foreign branch category. m Passive category n General category o Other (attach statement) 14k 141 14m 14n 140 Other information O Accrued P Total foreign taxes (check one): O Paid 9 Reduction in taxes available for credit (attach statement) r Other foreign tax information (attach statement) 14p 14g Fom 1120S (2018) supeuo Foreign Transactions Isson) auoou suogonpeg Page 4 Form 1120S (2018) Schedule K Shareholders' Pro Rata Share Items (continued) Total amount 15a Post-1986 depreciation adjustment. b Adjusted gain or loes c Depletion (other than oil and gas) d Oil, gas, and geothermal properties-gross income e Oll, gas, and geothermal properties-deductions. Other AMT items (attach statement) 15a 15h 15d 15e 15f 16a 16a Tax-exempt interest income 16b b Other tax-exempt income c Nondeductible expenses d Distributions (attach statement if required) (see instructions) 16d 16e e Repayment of loans from shareholders 17a Investment income. b Investment expenses c Dividend distributions paid from accumulated earnings and profits 17a 17b 17c d Other items and amounts (attach statement) Income/loss reconciliation. Combine the amounts on lines 1 through 10 in the far right 18 column. From the result, subtract the sum of the amounts on lines 11 through 12d and 14p Balance Sheets per Books 18 Schedule L End of tax year Beginning of tax year (c) (d) (a) (b) Assets Cash 2a Trade notes and accounts receivable b Less alowance for bad debts. Inventories U.S. government obligations Tax-exempt securities (see instructions) Other current assets (attach statement). Loans to shareholders. Mortgage and real estate loans Other investments (attach statement) 10a Buildings and other depreciable assets b Less accumulated depreciation 11a Depletable assets b Less accumulated depletion Land (net of any amortization). 12 13a Intangible assets (amortizable only) b Less accumulated amortization Other assets (attach statement) 14 Total assets 15 Liabilities and Shareholders' Equity Accounts payable . Mortgages, notes, bonds payable in less than 1 year Other current liabilities (attach statoment). 16 17 18 Loans from shareholders 19 Mortgages, notes, bonds payable in 1 year or more Other liabilities (attach statement) Capital stock. Additional paid-in capital Retained earnings 21 22 23 24 25 Adjustments to shareholders' equity (attach statement) Less cost of treasury stock Total liabilities and shareholders' equity 26 Form 1120S p01 enpeuey Items Affecting Other Shareholder syseg Minimum Tax swau (Lwy) luoneuuojul uogeo SCHEDULES K, M-1, AND K-1 TAX YEAR 2018 INCOME: GROSS RECEIPTS 825,000 COST OF GOODS SOLD (550,500) 7,600 QUALIFIED DIVIDEND INCOME 3,500 285,600 TAX-EXEMPT INCOME TOTAL INCOME EXPENSES: BOOK DEPRECIATION 12,800 SALARIES AND WAGES EXPENSE 90,000 POLITICAL CONTRIBUTIONS EXPENSE 2,000 RENT EXPENSE 12,000 STATE AND LOCAL TAXES 3,700 CHARITABLE CONTRIBUTIONS 6,500 INTEREST EXPENSE 6,700 BUSINESS INSURANCE EXPENSE 4,600 MEALS EXPENSE 4,500 SUPPLIES EXPENSE 3,100 TELEPHONE EXPENSE 4,100 UTILITIES EXPENSE 3,400 OFFICE EXPENSE 6,200 TOTAL EXPENSES 159,600 126,000 NET INCOME PER BOOKS OTHER INFORMATION: NEWPORT NEWS, INC. P.O. BOX 120 RUMFORD, RI 02916 EIN 23-6392101 BLAKE TURIN 50% OWNER ADDRESS: 1700 ADDISON DRIVE PROVIDENCE, RI 02903 SSN: 088-76-6301 TAX DEPRECIATION TOTAL 10,300 IRC SECTION 179 INCLUDED IN TAX DEPRECIATION 8,200 TOTAL CASH DISTRIBUTIONS TO SHAREHOLDERS (50% EACH) 60,000 ADVANCE PAYMENT TAXABLE IN 2017 INCLUDED IN BOOK INCOME IN 2018 13,700 Page 3 Fom 1120S (2018) Other Information (see instructions) (continued) Yes No Schedule B 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? If "Yes," enter the amount of principal reduction During the tax year, was a qualified subchapter S subsidiary election terminated or revoked? If "Yes," see instructions 14a Did the corporation make any payments in 2018 that would require it to file Formis) 10997. b f "Yes," did the corporation file or will it file required Forms 1099? 15 Is the corporation attaching Form 8996 to certify as a Qualitied Opportunity Fund? If "Yes," enter the amount from Form 8996, line 13 Schedule K Shareholders' Pro Rata Share Items 12 13 Total amount Ordinary business income (loss) (page 1, ine 21) 2 Net rental real estate income (loss) (attach Form 8825) 3a Other gross rental income (loss). b Expenses from other rental activities (attach statement) 3b e Other net rental income (loss). Subtract line 3b from line 3a Interest income. Dividends: a Ordinary dividends 5a b Qualified dividends. 5b Royalties. Net short-term capital gain (loss) (attach Schedule D (Form 1120S) 8a Ba Net long-term capital gain (loss) (attach Schedule D (Form 1120S) b Collectibles (28%) gain (loss). e Unrecaptured section 1250 gain (attach statement) Net section 1231 gain (loss) (attach Form 4797) Other income (loss) (see instructions) 8b 8c Type 10 10 11 11 Section 179 deduction (attach Form 4562) 12a 12a Charitable contributions b Investment interest expense Section 59e)(2) expenditures d 12b (1) Type (2) Amount 12o12 Other deductions (see instructions) Type 12d 13a Low-income housing credit (section 42015) 13a b Low-income housing credit (ather) Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) 13b 130 13d Other rental real estate credits (see instructions) Type d e Other rental credits (see instructions) 1 Biofuel producer oredit (attach Form 6478) 9 Other credits (see instructions) 14a Name of country or U.S. possession b Gross income from all sources Type 13e 13f Type 13g 14b O Gross inoome sourced at shareholder level Foreign gross income sourced at corporate level d Section 951A category. e Foreign branch category 1 Passive category 9 General category h Other (attach statement) Deductions allocated and apportioned at shareholder level Interest expense. 14c 14d 14e 141 14g 14h 14i 14 Other. Deductions allocated and apportioned at corporate level to foreign source income k Section 951A category I Foreign branch category. m Passive category n General category o Other (attach statement) 14k 141 14m 14n 140 Other information O Accrued P Total foreign taxes (check one): O Paid 9 Reduction in taxes available for credit (attach statement) r Other foreign tax information (attach statement) 14p 14g Fom 1120S (2018) supeuo Foreign Transactions Isson) auoou suogonpeg Page 4 Form 1120S (2018) Schedule K Shareholders' Pro Rata Share Items (continued) Total amount 15a Post-1986 depreciation adjustment. b Adjusted gain or loes c Depletion (other than oil and gas) d Oil, gas, and geothermal properties-gross income e Oll, gas, and geothermal properties-deductions. Other AMT items (attach statement) 15a 15h 15d 15e 15f 16a 16a Tax-exempt interest income 16b b Other tax-exempt income c Nondeductible expenses d Distributions (attach statement if required) (see instructions) 16d 16e e Repayment of loans from shareholders 17a Investment income. b Investment expenses c Dividend distributions paid from accumulated earnings and profits 17a 17b 17c d Other items and amounts (attach statement) Income/loss reconciliation. Combine the amounts on lines 1 through 10 in the far right 18 column. From the result, subtract the sum of the amounts on lines 11 through 12d and 14p Balance Sheets per Books 18 Schedule L End of tax year Beginning of tax year (c) (d) (a) (b) Assets Cash 2a Trade notes and accounts receivable b Less alowance for bad debts. Inventories U.S. government obligations Tax-exempt securities (see instructions) Other current assets (attach statement). Loans to shareholders. Mortgage and real estate loans Other investments (attach statement) 10a Buildings and other depreciable assets b Less accumulated depreciation 11a Depletable assets b Less accumulated depletion Land (net of any amortization). 12 13a Intangible assets (amortizable only) b Less accumulated amortization Other assets (attach statement) 14 Total assets 15 Liabilities and Shareholders' Equity Accounts payable . Mortgages, notes, bonds payable in less than 1 year Other current liabilities (attach statoment). 16 17 18 Loans from shareholders 19 Mortgages, notes, bonds payable in 1 year or more Other liabilities (attach statement) Capital stock. Additional paid-in capital Retained earnings 21 22 23 24 25 Adjustments to shareholders' equity (attach statement) Less cost of treasury stock Total liabilities and shareholders' equity 26 Form 1120S p01 enpeuey Items Affecting Other Shareholder syseg Minimum Tax swau (Lwy) luoneuuojul uogeo