where is schedule M3 in this question

a. On November 1, 2005, Janet Morton and Kim Wong formed Pet Kingdom to sell pets supplies.

Janet and Kim:

i. each own 50% of Pet Kingdoms common stock, which is the only class of stock Pet Kingdom authorized and issued when it was formed;

ii. Janet

iii. Janet is paid by Pet Kingdom for serving as its president. Her Social Security number is 123-45-6789;

iv. Kim is paid by Pet Kingdom for serving as its vice-president. His Social Security number is 987-65-4321.

Pet Kingdom's:

i. Business address: 1010 Northwest Parkway, Dallas, TX 75225;

ii. Telephone number: (214) 555-2211;

iii. Employer identification number (EIN): 11-111111; and Principal business activity code: 453910.

Pet Kingdom is an accrual method and calendar year taxpayer.

e. Pet Kingdoms inventory is determined using first in, first out (FIFO) and the lower of cost or market method.

f. For federal tax purposes, Pet Kingdom the Modified Accelerated Cost Recovery System (MACRS). If asked, use (input) a 7 year depreciation period for the tax return.

g. For financial (book) purposes, Pet Kingdom uses the straight-line-method of depreciation

II. PET KINGDOMS INCOME:

a. $5,750,000 in gross sales from selling pet supplies and $3,250,000 in gross profit ($5,750,000 gross sales LESS $200,000 sales returns and allowances LESS

$2,300,000 cost of goods sold);

b. Because Pet Kingdom owns 100% of the shares in Doggie Grooming Inc. and received a dividend distribution of $43,700 from Doggie Grooming. Janet and Kim think that Pet Kingdom can take a dividend receive deduction for the dividend distribution because Pet Kingdom owns 100% of Doggie Groomings stock;

Earned $15,000 of interest on its tax exempt city of Los Angeles municipal bond that it had purchased in a prior year; and

d. Earned $20,000 of interest on its certificates of deposits (CDs) that it owned for less than a year. A CD is included on Schedule L of a corporations federal income tax return as Other Current Assets, and not as Other Investments because it is cash that has been deposited with a bank but there are restrictions of when the depositor can withdraw the deposited cash.

III. PET KINGDOMS EXPENSES:

a. Paid both Janet and Kim a cash dividend distribution of $125,000 for a total dividend distribution by Pet Kingdom of $250,000 ($250,000 dividend distribution/ 2 shareholders);

Paid to both Janet and Kim as officers of Pet Kingdom $262,500 in salary for a total of $525,000 ($525,000 officer salaries/ 2 officers);

Paid a total of $725,000 in salary to its clerical and sales employees;

Paid state, local, and payroll taxes of $238,000;

Paid $140,000 for repairs and maintenance;

f. Paid $9,000 of interest on the loan it took out to buy its Los Angeles municipal bond (Pet Kingdom cannot take a business deduction for the interest it paid on the bond);

Paid $207,000 in interest on its business loans such as a mortgage on its warehouse (unlike the interest paid on its loan to buy the Los Angeles municipal bond, Pet

Kingdom can take a business deduction for the amount of interest it paid on these other business loans);

Paid $58,000 in advertising fees;

Paid $109,000 to rent a warehouse;

j. Pet Kingdoms depreciation expense was $106,000. If using the H&R Block software that comes with the textbook, enter the $106,000 depreciation amount on line 20 of the Pet Kingdoms Form 1120;

Made charitable donations of $38,000 to qualified tax-exempt charities;

Paid $60,000 for employee benefit programs;

m. Paid $40,000 of premiums on a $2 million life insurance policy on the lives of Janet and Kim. If Janet or Kim died, Pet Kingdom would receive $1 million in life insurance proceeds from the life insurance policy; and