Falcons Corporation (an S corporation) Income Statement December 31, year 1-2016
	Year 1-2016	Year 2-2017
Sales revenue	$300,000	$430,000
Cost of goods sold	(40,000)	(60,000)
Salary to owners	(40,000)	(80,000)
Employee wages	(25,000)	(50,000)
Depreciation expense	(20,000)	(40,000)
Section 179 expense	(30,000)	(50,000)
Interest income	12,000	22,500
Municipal bond income	1,500	4,000
Government fines	0	(2,000)
Overall net income	$158,500	$174,500
Distributions	$30,000	$50,000

Problem #1

Yan Mary and Maribel are 50%/50% owners of Falcons Corporation, an S corporation. In year 1, Yan Mary and Maribel each received distributions of $15,000 from Falcons Corporation.

a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above?

b. Complete Falcons Form 1120S, Schedule K for year 1. Kindly note that Form 1120-S is not required

c.Complete all required Schedule K-1s for year 1.

Problem #2

In year 2, Yan Mary and Maribel each received distributions of $25,000 from Falcons Corporation.

a. What amount of ordinary income and separately stated items are allocated to them for year 2 based on the information above?

b. Complete Falcons Form 1120S, Schedule K for year 2. Kindly note that Form 1120-S is not required

Complete all required Schedule K-1s for year 2