Question
Jamya and Manu are the shareholders of Buffalo Corporation an S Corporation . They each own 50% of Buffalo Corporation. In Year 1 , Jamya
Jamya and Manu are the shareholders of Buffalo Corporation an S Corporation. They each own 50% of Buffalo Corporation. In Year 1, Jamya and Manu each received distributions of $30,000 from Buffalo Corporation. In Year 2, they received distributions each of $50,000.
Buffalo Corporation (an S Corporation) Income Statement, Dec. 31, 20x8 and 20X9 | 20X8(Year 1) | 20X9(Year 2) |
Sales revenue | $600,000 | $860,000 |
Cost of goods sold | (80,000) | (120,000) |
Salary to shareholders Manu and Jamya | (80,000) | (160,000) |
Employee wages | (50,000) | (100,000) |
Depreciation expense | (40,000) | (80,000) |
Section 179 expense | (60,000) | (100,000) |
Interest income (related to business) | 24,000 | 45,000 |
Municipal bond income | 3,000 | 8,000 |
Government fines | 0 | (4000) |
Overall net income | 317,000 | 349,000 |
Distributions | $60,000 | $100,000 |
Requirements:
- Determine and explain the amount of ordinary income and separately stated items allocated to them for Year 1 based on the information given in the table above. Assume that Buffalo Corporation has qualified property with an unadjusted basis of $400,000.
- Using ProConnect and/or fill in forms, complete the S Corporation Form 1120S, Schedule K for Year 1 and Schedule K-1 for Jamya.
- Determine and explain the amount of ordinary income and separately stated items are allocated to them for Year 2 based on the information given in the table above, assuming Buffalo Corp has qualified property with an unadjusted basis of $400,000.
- Using ProConnect and/or fill in forms, complete the S Corporation Form 1120S, Schedule K for Year 2 and Schedule K-1 for Manu.
Submit a Schedule K, and one Schedule K-1 for Jamya and one for Manu and a Word document for questions a), and b), or one Word document with embedded Schedule K, and Schedule K-1 in the document.
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