Wildcat Corporation is a calendar-year, accrual-basis, C-corporation that was incorporated and began business on January 1, 2021. Its address is 550 S. Limestone St., Lexington, Kentucky 40506, and its employer identification number is 40-6657098. An income statement and balance sheet are available later in this assignment

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Prepare pages 1 and 6 of Wildcats Form 1120 (do not turn in pages 2-5).

Prepare Schedule M-3 (Parts II and III; skip Part I).

Prepare the journal entry, in accordance with U.S. GAAP, to update Wildcats income tax expense and adjust the balances in its deferred tax assets and liabilities. Also, prepare a disclosure indicating the amounts of current income tax expense and deferred income tax expense.

Wildcat Corporation Income Statement for Year Ending December 31, 2021 Sales revenues $ 8,961,386 Less: Sales allowances & returns (193.268) Net revenues $ 8,768,118 Less: Cost of goods sold (6.996.354) Gross margin $ 1,771,764 Less: Operating expenses Advertising $ 59,246 Bad debts 30,076 Charitable contributions 3,734 Depreciation 89,967 Insurance 114,598 Interest 16,437 Miscellaneous 43,201 152,536 Repairs & maintenance Salaries & wages & Taxes - 55,201 Utilities 147,072(1.399.883) Net operating income $ 371,881 Dividendi & interest income 3,369 Income tax payments (50.000) Net income 325,250 Rent 23,640 664,175 Wildcat Corporation Balance Sheet for December 31, 2021 Cash Accounts receivable (net of $17,083 allowance for doubtful accounts) Inventory Investments Depreciable property (net of $89,967 accumulated depreciation) Other assets Total assets $ 276,692 727,622 347,322 292,207 816,711 44.862 $ 2.505.416 Accounts payable Other current liabilities Note payable" Total liabilities $ 523,008 40,148 460.010 $ 1,023,166 21 Common stock Retained earnings Total equities $ 1,200,000 282.250 $ 1,482,250 Total liabilities & equities $ 2.505.416 See the notes for the income statement and balance sheet on the next page. 14 years Notes for income statement and balance sheet: Wildcat wrote off $12,993 of its accounts receivable as uncollectible. The contributions were all in cash. Book depreciation is determined using the straight-line method, a zero estimated residual value, and a full year of depreciation for the year of acquisition. Wildcat purchases and places into service the assets on January 1, 2021: Estimated MACRS Original cost useful life recovery period Class life $264,649 6 years 5 years 5 years $642,029 5 years 9 years Wildcat does not use Sec. 179 or bonus depreciation. See Chapter 1:10 for details regarding MACRS depreciation. See the current E&P exercise we did in class for an example of E&P depreciation. This is comprised of $2,760 for life insurance on Wildcat's president (with Wildcat as the beneficiary) and $111,838 for casualty and liability insurance. The life insurance does not have a cash surrender value. *The interest expense is on a loan whose proceeds Wildcat used to purchase depreciable assets. This is comprised of $9,325 of organizational expenditures and $33,876 of fully-deductible other expenses. Wildcat wants to deduct for 2021 the maximum amount allowed for these expenses. $$171,656 of this is compensation of Wildcat's officers. This is comprised of payroll and property taxes. Wildcat received $1,616 of dividends from domestic corporations in which it owns less than 1% of the stock. Wildcat owned the stock for more than 45 days before the stock became ex-dividend with respect to the dividends. Wildcat received $1,162 of interest on investments in corporate bonds and $591 of interest on investments in municipal bonds. * This is comprised of four quarterly estimated tax payments of $12,500 each. Wildcat debited its Federal Income Tax Expense account and credited its Cash account when it made the payments. Assume Wildcat is not subject to any state, local, or foreign income taxes. This is comprised of $156,215 of stocks, $35,029 of corporate bonds, and $100,963 of municipal bonds. *$43,472 of the note payable is a current liability, and $416,538 is a long-term liability, * The retained earnings are unappropriated. Wildcat paid $43,000 of cash dividends to its shareholders during the year. Hint for items a, d, and f: See the highlights of the material for September 8 & 13. Wildcat Corporation Income Statement for Year Ending December 31, 2021 Sales revenues $ 8,961,386 Less: Sales allowances & returns (193.268) Net revenues $ 8,768,118 Less: Cost of goods sold (6.996.354) Gross margin $ 1,771,764 Less: Operating expenses Advertising $ 59,246 Bad debts 30,076 Charitable contributions 3,734 Depreciation 89,967 Insurance 114,598 Interest 16,437 Miscellaneous 43,201 152,536 Repairs & maintenance Salaries & wages & Taxes - 55,201 Utilities 147,072(1.399.883) Net operating income $ 371,881 Dividendi & interest income 3,369 Income tax payments (50.000) Net income 325,250 Rent 23,640 664,175 Wildcat Corporation Balance Sheet for December 31, 2021 Cash Accounts receivable (net of $17,083 allowance for doubtful accounts) Inventory Investments Depreciable property (net of $89,967 accumulated depreciation) Other assets Total assets $ 276,692 727,622 347,322 292,207 816,711 44.862 $ 2.505.416 Accounts payable Other current liabilities Note payable" Total liabilities $ 523,008 40,148 460.010 $ 1,023,166 21 Common stock Retained earnings Total equities $ 1,200,000 282.250 $ 1,482,250 Total liabilities & equities $ 2.505.416 See the notes for the income statement and balance sheet on the next page. 14 years Notes for income statement and balance sheet: Wildcat wrote off $12,993 of its accounts receivable as uncollectible. The contributions were all in cash. Book depreciation is determined using the straight-line method, a zero estimated residual value, and a full year of depreciation for the year of acquisition. Wildcat purchases and places into service the assets on January 1, 2021: Estimated MACRS Original cost useful life recovery period Class life $264,649 6 years 5 years 5 years $642,029 5 years 9 years Wildcat does not use Sec. 179 or bonus depreciation. See Chapter 1:10 for details regarding MACRS depreciation. See the current E&P exercise we did in class for an example of E&P depreciation. This is comprised of $2,760 for life insurance on Wildcat's president (with Wildcat as the beneficiary) and $111,838 for casualty and liability insurance. The life insurance does not have a cash surrender value. *The interest expense is on a loan whose proceeds Wildcat used to purchase depreciable assets. This is comprised of $9,325 of organizational expenditures and $33,876 of fully-deductible other expenses. Wildcat wants to deduct for 2021 the maximum amount allowed for these expenses. $$171,656 of this is compensation of Wildcat's officers. This is comprised of payroll and property taxes. Wildcat received $1,616 of dividends from domestic corporations in which it owns less than 1% of the stock. Wildcat owned the stock for more than 45 days before the stock became ex-dividend with respect to the dividends. Wildcat received $1,162 of interest on investments in corporate bonds and $591 of interest on investments in municipal bonds. * This is comprised of four quarterly estimated tax payments of $12,500 each. Wildcat debited its Federal Income Tax Expense account and credited its Cash account when it made the payments. Assume Wildcat is not subject to any state, local, or foreign income taxes. This is comprised of $156,215 of stocks, $35,029 of corporate bonds, and $100,963 of municipal bonds. *$43,472 of the note payable is a current liability, and $416,538 is a long-term liability, * The retained earnings are unappropriated. Wildcat paid $43,000 of cash dividends to its shareholders during the year. Hint for items a, d, and f: See the highlights of the material for September 8 & 13