XYZ is a calendar-year corporation that began business on January 1, 2022. 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 $ 44,200,000 (29,835,000) $ 14,365,000 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 from restaurants) Goodwill impairment Organizational expenditures Other expenses Total expenses Income before taxes Expenses: 300,0001 36,8002 (4,000) 3,000 50,000 $ 14,750,800 (7,542,000)4 (242,000)5 (1,392,000) (96,000) (43,000) (62,000)6 (1,925,000)7 (112,000)8 (500,000)9 (22,200) (40,500)10 (41,000) 11 (182,000) 12 Provision for income taxes Net Income after taxes $ (12,199,700) $ 2,551,100 (400,000)13 $ 2,151,100 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 $36,800 interest income. $9,200 was from a City of Seattle bond, $11,200 was from a Tacoma City bond, $10,200 was from a fully taxable corporate bond, and the remaining $6,200 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 $37,500 of its accounts receivable as uncollectible. 7. Tax depreciation was $2,425,000. 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 charities during the year 10. On July 1 of this year, XYZ acquired the assets of another business. In the process, it acquired $363,000 of goodwill. At the end of the year, XYZ wrote off $40,500 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 $480,000 ($120,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2021 and that in 2021 It reported a tax liability of $668,000. During 2022, XYZ determined its taxable income at the end of each of the four quarters as follows: Quarter-end First Second Third Cumulative taxable income (loss) $ 505,000 $ 1,235,000 $ 1,849,500 Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. Note: Do not round intermediate calculations. Round your answers to the nearest dollar amount. d. Complete XYZ's Form 1120, page 1 Note: Input all the values as positive numbers. Use 2022 tax rules regardless of year on tax form. Complete this question by entering your answers in the tabs below. 1120 PG 1 1120 PG 1 Form 1120 Department of the Treasury Internal Revenue Service A Check if: U.S. Corporation Income Tax Return For calendar year 2021 or tax year beginning 20 OMB No. 1545-0123 2021, anding Go to www.irs.gov/Form 1120 for instructions and the latest information. Name 2021 B Employer identification number 1a Consolidated return (attach Form 851) b Lifelinonite consolidated return TYPE OR Number, street, and room or suite no. If a P.O. box, se instructions. C Date incorporated (mm/dd/yy) 2 Personal holding co. (attach Sch. PH) PRINT 3 Personal service carp. (see instructions) 4 Schedule M-3 attached City or town, state or province, country, and ZIP or foreign postal code D Total assets (see instructions) Income 1a Gross receipts or sales b Ratums and allowances c Balance. Subtract line 1b from line fa 2 Cost of goods sold (attach Form 1125-A) 3 Gross profit. Subtract line 2 from line 1c 4 Dividends and inclusions (Schedule C, line 23) 5 Interest 6 Gross rants 7 Gross royalties 8 Capital gain not 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 officers (see instructions-attach Form 1125-E) 13 Salaries and wages (less employement credits) 14 Repairs and maintenance 15 Bad debts 16 Rants 17 Taxes and licenses (1)Initial (3) Name E Check (2) Final return return (4) Address change change 1a 1b 0 1c 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Interest (see instructions) 18 Deductions (See instructions for limitations on deductions.) 24 Employee benefit programs 19 Charitable contributions 19 20 Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) 20 21 Depletion 21 22 Advertising 22 23 Pension, profit-sharing, etc., plans 23 24 25 Reserved for future use 25 26 Other deductions (attach statement) 26 27 Total deductions. Add lines 12 through 26 27 28 Taxable income before not operating loss deduction and special deductions. Subtract line 27 from line 11 28 29 a Net operating loss deduction (see instructions) b Special deductions (Schedule C, line 24) 29a 29b c Add lines 29a and 29b 30 Taxable income. Subtract line 29c from line 28. see instructions Tax, Refundable Credits, and Payments 31 Total tax (Schedule J, Part I, line 11) 32 Reserved for future use 33 Total payments and credits (Schedule J, Part III, line 23) 34 Estimated tax penalty. See instructions. Check if Form 2220 is attached 35 Amount owed. If line 33 is smaller than the total of lines 31 and 34, enter amount owed 36 Overpayment. If line 33 is larger than the total of lines 31 and 34, enter amount overpaid 37 Enter amount from line 36 you want: Credited to 2022 estimated tax 29c 30 31 32 33 34 35 36 Refunded 37