corporations Generar Rules Appwede Balance Sheet 12/31/2018 Trial Balance 12/31/2019 Debit Credit Debit Credit $ 12,000 14,000 150.000 $ 22.000 14,000 190,000 $ 38,000 94.000 10,000 34.000 $63.500 117.200 10,000 34.000 25,440 16,960 235,000 1000 400 3.500 Cash Investments (1) ... Equipment (2,3) Accumulated depreciation Notes payable (3, 4) Capital stock Accumulated adjustments account Cash distributed to Phil Cash distributed to Kate Revenues.... Dividend income (1) Interest income (1) Section 1245 gain (depreciation recapture)..... Salary expense (5) Rent expense Interest expense Tax expense (property and payroll) Repair expense.. Depreciation expense Health Insurance expense (6) Property insurance expense Office supplies expense. Utility expense. Charitable contributions Totals 110,000 12,000 16,600 13,800 5,800 29,200 1,600 1,500 3,000 2,200 500 $176,000 $176,000 $464,600 $464,600 1. The investment account consists of marketable securities of U.S. corpora- tions and U.S. Treasury Bonds. All of the dividends are considered quali- fied dividends. 2. Equipment was sold May 12, 2019, for $9,800. It was purchased new on May I of the prior year for $10,000, and its basis when sold was $6,300. 3. New equipment was purchased March 1, 2019, with $5,000 cash and a $45.000 three year note payable. The first note payment is March 1, 2020. (Note: The correct amount of tax depreciation is included in depreciation expense account in the trial balance.) 4. Notes payable are long-term except for $20.000 of the note to be paid next year. 5. Salary expense is composed of salary of $30,000 each to Phil and to Kate and $50,000 to unrelated employees. 6. Health insurance premiums paid were for the unrelated employees. Prepare Form 1120S (including Schedules K, L, and M), and Schedule K-1 for Phil. Complete all six pages, including responses to all questions. If any necessary in- formation is missing in the problem, assume a logical answer and record it. Do not prepare Schedule K-1 for Kate or other required supplemental forms at this time. 11-44 During 2019, Lisa Cutter and Jeff McMullen decided they would like to start their own gourmet hamburger business. Lisa and Jeff believed that the public would love the recipes used by Lisa's mom, Tina Woodbrook. They also thought that they had the necessary experience to enter this business since Jeff currently owned a fast- food franchise business while Lisa had experience operating a small bakery. After doing their own market research, they established Slattery's Inc. and elected t be taxed as an S corporation. The company's address is 5432 Partridge Pl., Tulsa, Oklahoma 74105, and its employer identification number is 88-7654321. The company started modestly. After refurbishing an old gas station that it had purchased, the company opened for business on February 25, 2019. Shortly after corporations Generar Rules Appwede Balance Sheet 12/31/2018 Trial Balance 12/31/2019 Debit Credit Debit Credit $ 12,000 14,000 150.000 $ 22.000 14,000 190,000 $ 38,000 94.000 10,000 34.000 $63.500 117.200 10,000 34.000 25,440 16,960 235,000 1000 400 3.500 Cash Investments (1) ... Equipment (2,3) Accumulated depreciation Notes payable (3, 4) Capital stock Accumulated adjustments account Cash distributed to Phil Cash distributed to Kate Revenues.... Dividend income (1) Interest income (1) Section 1245 gain (depreciation recapture)..... Salary expense (5) Rent expense Interest expense Tax expense (property and payroll) Repair expense.. Depreciation expense Health Insurance expense (6) Property insurance expense Office supplies expense. Utility expense. Charitable contributions Totals 110,000 12,000 16,600 13,800 5,800 29,200 1,600 1,500 3,000 2,200 500 $176,000 $176,000 $464,600 $464,600 1. The investment account consists of marketable securities of U.S. corpora- tions and U.S. Treasury Bonds. All of the dividends are considered quali- fied dividends. 2. Equipment was sold May 12, 2019, for $9,800. It was purchased new on May I of the prior year for $10,000, and its basis when sold was $6,300. 3. New equipment was purchased March 1, 2019, with $5,000 cash and a $45.000 three year note payable. The first note payment is March 1, 2020. (Note: The correct amount of tax depreciation is included in depreciation expense account in the trial balance.) 4. Notes payable are long-term except for $20.000 of the note to be paid next year. 5. Salary expense is composed of salary of $30,000 each to Phil and to Kate and $50,000 to unrelated employees. 6. Health insurance premiums paid were for the unrelated employees. Prepare Form 1120S (including Schedules K, L, and M), and Schedule K-1 for Phil. Complete all six pages, including responses to all questions. If any necessary in- formation is missing in the problem, assume a logical answer and record it. Do not prepare Schedule K-1 for Kate or other required supplemental forms at this time. 11-44 During 2019, Lisa Cutter and Jeff McMullen decided they would like to start their own gourmet hamburger business. Lisa and Jeff believed that the public would love the recipes used by Lisa's mom, Tina Woodbrook. They also thought that they had the necessary experience to enter this business since Jeff currently owned a fast- food franchise business while Lisa had experience operating a small bakery. After doing their own market research, they established Slattery's Inc. and elected t be taxed as an S corporation. The company's address is 5432 Partridge Pl., Tulsa, Oklahoma 74105, and its employer identification number is 88-7654321. The company started modestly. After refurbishing an old gas station that it had purchased, the company opened for business on February 25, 2019. Shortly after