PROBLEM 6SCORPORATION (FORM 1120S)

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. The companys S corporation election was made on January 15, 2007. The following information was taken from the income statement for 2012.

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 (150,000)

Repairs (206,106)

Depreciation expense (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, 2012 December 31, 2012

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

Premiums accounting firm provides the following additional information.

Distributions to shareholders $100,000

Beginning Balance, Accumulated adjustments account $111,148

Using the preceding information, prepare a complete Form 1120S and Schedule K1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. If any in- formation is missing, make realistic assumptions.

PROBLEM 6SCORPORATION (FORM 1120S) 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. The company's S corporation election was made on January 15, 2007. The following information was taken from the income statement for 2012. 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 (150,000) Repairs (206,106) Depreciation expense (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, 2012 December 31, 2012 Cash Accounts receivable Inventories $ 47,840 93,100 $? 123,104 9,607 3,467 Prepaid expenses Building and equipment 8,333 17,582 138,203 185,348 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 $214,848 $844,422 Capital stock 30,000 Retained earnings 111,148 Total liabilities and capital Premium's accounting firm provides the following additional information. Distributions to shareholders $100,000 Beginning Balance, Accumulated adjustments account $111,148 Using the preceding information, prepare a complete Form 1120S and Schedule K- 1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. If any in- formation is missing, make realistic assumptions