On November 1, 2007, Janet Morton and Kim Wong formed Pet Kingdom, Inc., tosell 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% of the 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 determined using FIFO and the lower of cost or market method. Pet Kingdom uses the straight-line method of depreciation for book purposes and accelerated depreciation (MACRS) for tax purposes.
€¢ During 2016, the corporation distributed cash dividends of $250,000.

Pet Kingdom€™s financial statements for 2016 are shown below.

During 2016, Pet Kingdom made estimated tax payments of $90,000 each quarter to the IRS. Prepare a Form 1120 for Pet Kingdom for tax year 2016. Suggested software: H&R Block Tax Software.

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Income Statement Income $ 5,750,000 Gross sales Sales returns and allowances (200,000) $ 5,550,000 (2,300,000) $ 3,250,000 Net sales Cost of goods sokld Gross profit Dividends received from stock investments in less-than-20%- owned U.S. corporations 43,750 Interest income: $ 15,000 State bonds Certificates of deposit 20,000 35,000 $ 3,328,750 Total income Expenses Salaries-officers Janet Morton $262,500 $525,000 Kim Wong 262,500 Salaries-clerical and sales 725,000 Taxes (state, local, and payroll) Repairs and maintenance 238,000 140,000 Interest expense: Loan to purchase sta te bonds $ 9,000 Other business loans 207,000 216,000 Advertising Rental expense Depreciation 58,000 109,000 106,000 Charitable contributions 38,000 Employee benefit programs 60,000 Premiums on term life insurance policies on lives of Janet Morton and Kim Wong; Pet Kingdom is the designated benefidary 40,000 (2,255,000) $ 1,073,750 (356,023) Total expenses Net income before taxes Federal income tax Net income per books 717.727 Balance Sheet Assets January 1, 2016 December 31, 2016 Cash $ 1,200,000 $ 1,037,750 Trade notes and accounts receivable 2,062,500 2,147,000 Inventories 2,750,000 3,030,000 Stock investment 1,125,000 1,125,000 State bonds 375,000 375,000 Certificates of deposit Prepaid Federal tax 400,000 400,000 -0- 3,977 Buildings and other depreciable assets 5,455,000 5,455,000 Accumulated depreciation (606,000) (712,000) Land 812,500 812,500 Other assets 140,000 128,500 Total assets $13,714,000 $13,802,727