On February 12, 2005, Nancy Trout and Delores Lake formed Kingfisher Corporation to sell fishing tackle. Pertinent information regarding Kingfisher is summarized as follows:

? Kingfisher?s business address is 1717 Main Street, Ely, MN 55731; its telephonenumber is (218) 555-2211; and its e-mail address is kingfisher@kf.com

? The employer identification number is 11-1111113, and the principal business activity code is 451110.

? Nancy owns 50% of the common stock and is president of the company, and Delores owns 50% of the common stock and is vice president of the company. No other class of stock is authorized.

? Both Nancy and Delores are full-time employees of Kingfisher. Nancy?s Social Security number is 123-45-6788, and Delores?s Social Security number is 123-45-6787.

? Kingfisher is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Kingfisher uses the straight-line method of deprecation for book purposes and accelerated depreciation (MACRS) for tax purposes.

? During 2018, the corporation distributed cash dividends of $80,000. Kingfisher?s financial statements for 2018 are shown on the following pages.

During 2018, Kingfisher made estimated tax payments of $27,000 each quarter to the IRS. Prepare a Form 1120 for Kingfisher for tax year 2018. Suggested software: ProConnect Tax Online.

Transcribed Image Text:

Income Statement Income Gross sales Sales returns and allowances $2,408,000 (80,000) Net sales $2,328,000 Cost of goods sold Gross profit (920,000) $1,408,000 Dividends received from stock investments in less-than-20%-owned U.S. corporations 12,000 Interest income: $ 14,000 10,000 State bonds Certificates of deposit 24,000 $1,444,000 Total income Expenses Salaries-officers: Nancy Trout $160,000 Delores Lake 160,000 $320,000 Salaries-clerical and sales 290,000 Taxes (state, local, and payroll) Repairs and maintenance 85,000 56,000 Interest expense: Business loans $ 12,000 8,000 Loan to purchase state bonds Advertising Rental expense 20,000 6,000 68,000 Depreciation* 40,000 Charitable contributions 15,000 Employee benefit programs 24,000 Premiums on term life insurance policies on lives of Nancy Trout and Delores Lake; Kingfisher is the designated beneficiary Total expenses 16,000 (940,000) $ 504,000 Net income before taxes Federal income tax (106,680) $ 397,320 Net income per books Balance Sheet Assets January 1, 2018 December 31, 2018 $ 380,000 308,400 Cash $ 337,300 Trade notes and accounts receivable 480,280 Inventories 900,000 1,012,000 State bonds 160,000 160,000 Federal income tax refund -0- 1,320 Certificates of deposit 140,000 140,000 Stock investments 300,000 300,000 Building and other depreciable assets Accumulated depreciation 240,000 240,000 (88,800) (128,800) Land 20,000 20,000 Other assets 3,600 $2,363,200 2,000 Total assets $2,564,100 Llabilitles and Equlty January 1, 2018 December 31, 2018 $ 300,000 $ 233,880 40,000 Accounts payable Other current liabilities 80,300 Mortgages Capital stock Retained earnings Total liabilities and equity 210,000 200,000 500,000 500,000 1,272,900 $2,363,200 1,590,220 $2,564,100