Lockhart Corporation is a calendar-year corporation. At the beginning of 2013 it

Lockhart Corporation is a calendar-year corporation. At the beginning of 2013 its election to be taxed as an S corporation became effective. Lockhart Corp.s balance sheet at the end of 2012 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation):AssetAdjusted BasisFMVCash$35000$35000Accounts receivable 2500025000Inventory180000 210000Land 125000 120000Totals $365000 $390000Lockharts business income for the year was $65000 (this would have been its taxable income if it were a C corporation).