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Miss Harrell and Smith, Inc., 204 Ambulance Street, Anywhere, CA 92345, is a corporation (EIN 57-1234567) formed on January 1, 2015. Information concerning the corporation and its two shareholders follows. It uses the tax/cash basis accounting, did not pay dividends in excess of earnings and profits, has no foreign shareholders, is not publicly traded, and has no NOL carrybacks.

Bruce Harrell (SSN 412-34-5670), 1018 Lexington Downs, Anywhere, CA 92345 is a 60% shareholder. Della Smith (SSN 412-34-5671), 4564 Yates Rd., Anywhere, CA 92345, is a 40% shareholder. Bruce received a dividend of $60,000, and Della received a dividend of $40,000. Both of these dividends are in addition to their salaries.

Harrell and Smith, Inc. Comparative Balance Sheet As of December 31, 2020 and December 31, 2021
Assets:
	12/31/17	12/31/18
Cash	$ 39,955	$ 45,459
Investments	258,456	169,125
Office Equipment	225,000	310,759
Accumulated Depreciation (Equipment)	(156,000)	(165,379)
Building	491,200	491,200
Accumulated Depreciation (Building)	(37,232)	(49,826)
Total Assets:	$821,379	$801,338
Liabilities and Equity:
Notes Payable	$ 353,600	$ 335,458
Common Stock	10,000	10,000
Retained Earnings	457,779	455,880
Total Liabilities and Equity	$821,379	$801,338

Harrell and Smith, Inc. Income Statement For the Year Ending December 31, 2021
Revenue:
Consulting Income	$866,689
Interest Income	4,231
Rental Income	9,000
Dividend Income (Qualified)	8,234
Long-Term Capital Losses	(8,200)
Total Revenue	$879,954
Expenses:
Salaries and Wages (non-owners)	$253,000
Officers Salaries
Harrell	225,000
Smith	150,000
Depreciation	21,973
Interest Expense	20,127
Taxes and Licenses	24,051
Utilities	15,500
Travel	11,850
Meals (100%)	12,452
Auto	18,500
Insurance (health)	7,000
Accounting and legal	6,450
Repairs	3,200
Charitable Contributions	12,000
Payroll Penalties	750
Total Expenses	$781,853
Net Income	$ 98,101

• Prepare Form 1120 pages 1-5 for Harrell and Smith, Inc. Schedule D, and Form 4562 can be omitted (the information given is not sufficient to complete these forms).

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