Question
Note: This problem is for the 2020 tax year. John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc.
Note: This problem is for the 2020 tax year.
John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111120), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premium's S election was made on January 15, 2012, its date of incorporation. The following information was taken from the company's 2020 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 |
A comparative balance sheet appears below.
January 1, 2020 | December 31, 2020 | ||
Cash | $ 47,840 | $ ? | |
Accounts receivable | 93,100 | 123,104 | |
Inventories | 9,607 | 3,467 | |
Prepaid expenses | 8,333 | 17,582 | |
Building and equipment | 138,203 | 185,348 | |
Accumulated depreciation | (84,235) | (?) | |
Land | 2,000 | 2,000 | |
Total assets | $214,848 | $844,422 | |
Accounts payable | $ 42,500 | $ 72,300 | |
Notes payable (less than 1 year) | 4,500 | 2,100 | |
Notes payable (more than 1 year) | 26,700 | 24,300 | |
Capital stock | 30,000 | 30,000 | |
Retained earnings | $111,148 | ? | |
Total liabilities and capital | $214,848 | $844,422 | |
Premium's accounting firm provides the following additional information.
Distributions to shareholders (not reported on Form 1099-DIV and made based on percentage of ownership): | $100,000 |
Beginning balance, Accumulated adjustments account: | 111,148 |
Ordinary business income for QBI: | 639,574 |
W-2 wages for QBI: | 795,205 |
Required:
Prepare Premium's Form 1120S, Additional Information - Continuation Statement, and Schedule K-1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303.
- If an amount box does not require an entry or the answer is zero, enter "0".
- Enter all amounts as positive numbers, unless otherwise instructed.
- If required, round amounts to the nearest dollar.
- Make realistic assumptions about any missing data.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
The question is complete and requires preparation of tax forms for the S Corporation Premium Inc Heres how you can go about solving each part of the p...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started