Required information [The following information applies to the questions displayed below.] XYZ is a calendar-year corporation that began business on January 1, 2021. For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-6. XYZ corporation Income statement For current year Revenue from sales Cost of Goods Sold Gross profit Other income: Book Income $ 42,800,000 (28,890,000) $ 13,910,000 Income from investment in corporate stock Interest income Capital gains (losses) Gain or loss from disposition of fixed assets. Miscellaneous income Gross Income Compensation Stock option compensation Advertising Repairs and Maintenance Rent Bad Debt expense Depreciation Warranty expenses Charitable donations Meals (all at restaurants) Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Provision for income taxes Net Income after taxes Expenses: 300,0001 31, 2002 (4,000) 3,000 50,000 $ 14,290,200 (7,528,000)4 (228,000)5 (1,378,000) (89,000) (36,000) (55,000)6 (1,750,000)7 (98,000)8 (500,000)9 (20,800) (37,000) 10 (50,000) 11 (168,000) 12 $ (11,937,800) $ 2,352,400 (400,000) 13 $ 1,952,400 1. XYZ owns 30% of the outstanding Hobble Corporation (HC) stock. Hobble Corporation reported $1,000,000 of Income for the year. XYZ accounted for its Investment in HC under the equity method, and it recorded its pro rata share of HC's earnings for the year. HC also distributed a $200,000 dividend to XYZ. For tax purposes, HC reports the actual dividend received as income, not the pro rata share of HC's earnings. 2. Of the $31,200 Interest income, $7,800 was from a City of Seattle bond, $9,800 was from a Tacoma City bond, $8,800 was from a fully taxable corporate bond, and the remaining $4,800 was from a money market account. 3. This gain is from equipment that XYZ purchased in February and sold in December (I.e., It does not qualify as 1231 gain). 4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation). 5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers). 6. XYZ actually wrote off $34,000 of its accounts receivable as uncollectible. 7. Tax depreciation was $2,250,000. 8. In the current year, XYZ did not make any actual payments on warranties it provided to customers. 9. XYZ made $500,000 of cash contributions to qualified charities during the year. The donations are qualified charitable contributions for purposes of determining the charitable contribution limitation. 10. On July 1 of this year XYZ acquired the assets of another business. In the process, it acquired $342,000 of goodwill. At the end of the year, XYZ wrote off $37,000 of the goodwill as impaired. 11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes. 12. The other expenses do not contain any items with book-tax differences. 13. This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes. Estimated tax Information: XYZ made four equal estimated tax payments totaling $453,000 ($110,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2020 and that in 2020 It reported a tax liability of $612,000. During 2021, XYZ determined its taxable income at the end of each of the four quarters as follows: Quarter-end Cumulative taxable income (loss) $540,000 $ 1,170,000 First Second Third $ 1,540,000 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round Intermediate calculations. Round your answers to the nearest dollar amount.) d. Complete XYZ's Form 1120, page 1 (Input all the values as positive numbers. Use 2021 tax rules regardless of year on tax form.) 1120 PG 1 1120 Page 1 Form 1120 Department of the Treasury Internal Revenue Service A Check if U.S. Corporation Income Tax Return For calendar year 2020 or tax year beginning. Go 2020, ending to www.irs.gov/Form1120 for instructions and the latest information. Name 20 OMB No. 1545-0123 2020 B Employer identification number 1a Consolidated return (attach Form TYPE 851) b Life/nonlife consolidated return OR Number, street, and room or suite no. If a P.O. bax, see instructions. C Date incorporated (mm/dd/yy) 2 Personal holding co. (attach Sch. PRINT PH) 3 Personal service corp. (see City or town, state or province, country, and ZIP or foreign postal Total assets (see instructions) code instructions) 4 Schedule M-3 attached (3) Name E Check if (1) Initial return (2) Final retum (4) Address change change 1a Gross receipts or sales 1a b Returns and allowances 1b c Balance. Subtract line 1b from line ta 0 1c 2 Cost of goods sold (attach Form 1125-A) 3 Gross profit. Subtract line 2 from line 1c Income 4 Dividends and inclusions (Schedule C, line 23) 5 Interest 6 Gross rents 7 Gross royalties 8 Capital gain net income (attach Schedule D (Form 1120)) 9 Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797) 10 Other income (see instructions-attach statement) 11 Total income. Add lines 3 through 10 12 Compensation of afficers (see instructions-attach Form 1125-E) 13 Salaries and wages (less employement credits) 14 Repairs and maintenance 15 Bad debts 18 Rents 17 Taxes and licenses 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 Interest (see instructions) 18 22 Advertising Deductions (See instructions for limitations on deductions.) 19 Charitable contributions 23 Pension, profit-sharing, etc., plans 24 Employee benefit programs 25 Reserved for future use 19 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) 21 Depletion 20 21 22 23 24 25 26 Other deductions (attach statement) 26 27 Total deductions. Add lines 12 through 26 27 28 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11 29 a Net operating loss deduction (see instructions) 281 0 29a Prev