Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $14,000 from Falcons Corporation. Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Sales revenue Cost of goods sold Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Year 1 $ 335,000 (42,000) (40,000) (30,000) (20,000) (30,000) 10,000 1,900 Year 2 $ 465,000 (64,000) (80,000) (60,000) (40,000) (50,000) 18,500 4,800 (1,000) $ 193,300 Overall net income $ 184,900 $ 28,000 Distributions $ 50,000 b. Complete Falcons's Form 1120-S, Schedule K, for year 1. Prepare Form 1120-S. Schedule K Schedule K for Form 1120-s. Page 3 Form 1120-S (2020) Schedule K Total amount 3c Shareholders' Pro Rata Share Items 1 Ordinary business income (loss) (page 1, line 21) 2 Net rental real estate income (loss) (attach Form 8825) 3a Other gross rental income (loss) b Expenses from other rental activities (attach statement) c Other net rental income (loss). Subtract line 3b from line 3a 4 Interest income 5 Dividends a Ordinary dividends b Qualified dividends 6 Royalties 7 Net short-term capital gain (loss) (attach Schedule D (Form 1120-S)) 8a Net long-term capital gain (loss) (attach Schedule (Form 1120-S)) b Collectibles (28%) gain (loss) Ileranstid saatios 100 sin inhanh nistamant 5 Income (Loss) 56 6 7 8a 8b UU 8c 9 10 11 Deductions 12a 12b 12c(2) 12d (2) Amount Type - 13a 13b 13c Credits 13d 13e 13f 13g 14b 14c 14d U VUIICHUIGS (20/0) yall (5) Unrecaptured section 1250 gain (attach statement) 9 Net section 1231 gain (loss) (attach Form 4797) 10 Other income (loss) (see instructions) Type 11 Section 179 deduction (attach Form 4562) 12a Charitable contributions b Investment interest expense c Section 59(e)(2) expenditures (1) Type d Other deductions (see instructions) ( 13a Low-income housing credit (section 420)(5)) b Low-income housing credit (other) c Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) d Other rental real estate credits (see instructions) Type - e Other rental credits (see instructions) Type : f Biofuel producer credit (attach Form 6478) g Other credits (see instructions) Type - 14a Name of country or U.S. possession b Gross income from all sources c Gross income sourced at shareholder level - Foreign gross income sourced at corporate level d Reserved for future use e Foreign branch category f Passive category g General category h Other (attach statement) Deductions allocated and apportioned at shareholder level i Interest expense || i Other |- Deductions allocated and apportioned at corporate level to foreign source income - k Reserved for future use I Foreign branch category m Passive category n n General category o Other (attach statement) ) |- Other information p Total foreign taxes (check one): q Reduction in taxes available for credit (attach statement) r Other foreign tax information (attach statement) 15a Post-1986 depreciation adjustment b Adjusted gain or loss b c Depletion (other than oil and gas) d Oil, gas, and geothermal propertiesgross income e Oil, gas, and geothermal propertiesdeductions f Other AMT items (attach statement) 14e 141 149 14h Foreign Transactions 141 14 14k 141 14m 14n 140 Paid Accrued 14p 149 Alternative Minimum Tax (AMT) Items 15a 15b 15c 15d 15e 15f ACTA AVARRAPARIRAAWA ACA 14h 140 14p 149 15a 15b 15c Alternative Minimum Tax (AMT) Items 150 General category o Other (attach statement) - Other information p Total foreign taxes (check one) Paid Accrued Reduction in taxes available for credit (attach statement) r Other foreign tax information (attach statement) 15a Post-1986 depreciation adjustment b Adjusted gain or loss c Depletion (other than oil and gas) d Oil, gas, and geothermal propertiesgross income e Oil, gas, and geothermal propertiesdeductions f Other AMT items (attach statement) 16a Tax-exempt interest income b Other tax-exempt income c Nondeductible expenses d Distributions (attach statement if required) (see instructions) e Repayment of loans from shareholders e 17a Investment income b Investment expenses c Dividend distributions paid from accumulated earnings and profits d Other items and amounts (attach statement) 18 Income (loss) reconciliation. Combine the amounts on lines 1 through 10 in the far right column. From the result, subtract the sum of the amounts on lines 11 through 12d and 14p Items Affecting Shareholder Basis 15e 15f 16a 16b 16c 16d 16e 17a 17b Other Information 17c Reconciliation 18 0 Form 1120-S (2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education.