Note: This problem is for the 2021 tax year.

On November 1, 2010, Janet Morton and Kim Wong formed Pet Kingdom, Inc., to sell 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 11-1111112, 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 123-45-6788, and Kim's Social Security number is 123-45-6787.
• 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 2021, the corporation distributed cash dividends of $250,000.

Pet Kingdom's financial statements for 2021 are shown below.

Income StatementIncome

Gross sales$5,750,000Sales returns and allowances(200,000)Net sales$5,550,000Cost of goods sold(2,300,000)Gross profit$3,250,000Dividends received from stockinvestments in less-than-20%- owned U.S. corporations43,750Interest income:State bonds$15,000Certificates of deposit20,00035,000Total income$3,328,750ExpensesSalariesofficers:Janet Morton$262,500Kim Wong262,500$525,000Salariesclerical and sales725,000Taxes (state, local, and payroll)238,000Repairs and maintenance140,000Interest expense:Loan to purchase state bonds$9,000Other business loans207,000216,000Advertising58,000Rental expense109,000Depreciation*106,000Charitable contributions (cash)38,000Employee benefit programs60,000Premiums on term life insurancepolicies on lives of Janet Morton and Kim Wong; Pet Kingdom is the designated beneficiary40,000Total expenses(2,255,000)Net income before taxes$1,073,750Federal income tax(221,734)Net income per books$852,016* Depreciation for tax purposes is $136,000. You are not provided enough detailed data to complete a Form 4562 (depreciation). If you solve this problem using Intuit ProConnect, enter the amount of depreciation on line 20 of Form 1120.

Balance SheetAssetsJanuary 1, 2021December 31, 2021

Cash$1,200,000$1,039,461Trade notes and accounts receivable2,062,5002,147,000Inventories2,750,0003,030,000Stock investment1,125,0001,125,000State bonds375,000375,000Certificates of deposit400,000400,000Prepaid Federal tax02,266Buildings and other depreciable assets5,455,0005,455,000Accumulated depreciation(606,000)(712,000)Land812,500812,500Other assets140,000128,500Total assets$13,714,000$13,802,737Liabilities and EquityJanuary 1, 2021December 31, 2021Accounts payable$2,284,000$1,840,711Other current liabilities175,000155,000Mortgages4,625,0004,575,000Capital stock2,500,0002,500,000Retained earnings4,130,0004,732,016Total liabilities and equity$13,714,000$13,802,727

Required:

During 2021, Pet Kingdom made estimated tax payments of $56,000 each quarter to the IRS. Prepare Pet Kingdom's corporate tax return for tax year 2021 using Form 1120 (and any other appropriate forms and schedules).

• If an amount box does not require an entry or the answer is zero, enter "0".
• Enter all amounts as positive numbers, unless otherwise instructed.
• If required, round amounts to the nearest dollar.
• Make realistic assumptions about any missing data.

Schedule M-2 Analysis of Unappropriated Retained Earnings per Books (Schedule L, Line 25) 1 Balance at beginning of year . . . . . . . . 2 Net income (loss) per books . . . . . . . . 3 Other increases (itemize): 4 Add lines 1,2 , and 3 5 Distributions: a Cash . . . . . . . . b Stock . . . . . . . . c Property 6 Other decreases (itemize): 7 Add lines 5 and 6 . 8 Balance at end of year (line 4 less line 7) Form 1120 (2021)