Tax Return Problems 1. 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 11-1111111, and the principal business activity code is 453910. "Janet and Kim each own 50% ofthe 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 123-45-6789, and Kim's Social Security number is 987-65-4321. 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 2018, the corporation distributed cash dividends of $250,000. Pet Kingdom's financial statements for 2018 are shown below Income Statement Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends received from stock $ 5,750,000 (200,000) $ 5,550,000 $ 3,250,000 investments in less-than-20%- owned US. corporations 43,750 Interest income: State bonds Certificates of deposit 15,000 20,000 35,000 $ 3,328,750 Total income continued Tax Return Problems 1. 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 11-1111111, and the principal business activity code is 453910. "Janet and Kim each own 50% ofthe 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 123-45-6789, and Kim's Social Security number is 987-65-4321. 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 2018, the corporation distributed cash dividends of $250,000. Pet Kingdom's financial statements for 2018 are shown below Income Statement Income Gross sales Sales returns and allowances Net sales Cost of goods sold Gross profit Dividends received from stock $ 5,750,000 (200,000) $ 5,550,000 $ 3,250,000 investments in less-than-20%- owned US. corporations 43,750 Interest income: State bonds Certificates of deposit 15,000 20,000 35,000 $ 3,328,750 Total income continued