1. John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premiums S election was made on January 15, 2011, its date of incorporation. The following information was taken from the companys 2018 income statement.

Interest income	$ 100,000
Gross sales receipts	2,410,000
Beginning inventory	9,607
Direct labor	(203,102)
Direct materials purchased	(278,143)
Direct other costs	(249,356)
Ending inventory	3,467
Salaries and wages	(442,103)
Officers salaries ($75,000 each to Parsons and Smith)	(150,000)
Repairs	(206,106)
Depreciation expense, tax and book	(15,254)
Interest expense	(35,222)
Rent expense (operating)	(40,000)
Taxes	(65,101)
Charitable contributions (cash)	(20,000)
Advertising expenses	(20,000)
Payroll penalties	(15,000)
Other deductions	(59,899)
Book income	704,574

2. A comparative balance sheet follows.
3. Premiums accounting firm provides the following additional information.

Distributions to shareholders	$100,000
Beginning balance, Accumulated adjustments account	111,148

5. Using the preceding information, prepare a Form 1120S and Schedule K1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. Do not complete the Forms 1125A, 1125E, and 4562. If any information is missing, make realistic assumptions. Suggested software: ProConnect Tax Online.