S CORPORATION TAX RETURN PROBLEM

Required:

Using the information provided below, complete First Place Inc.'s (FPI) 2015 Form 1120S. Also complete Kate Kleiber's Schedule K-1.

Form 4562 for depreciation is not required. Include the amount of tax depreciation given in the problem on the appropriate line on the first page of Form 1120S.

If any information is missing, use reasonable assumptions to fill in the gaps.

The forms, schedules, and instructions can be found at the IRS Web site (www.irs.gov). The instructions can be helpful in completing the forms.

Facts:

First Place Inc. (FPI) was formed as a corporation on January 5, 2012, by its two owners Kate Kleiber and James Chandler. FPI immediately elected to be taxed as an S corporation for federal income tax purposes. FPI sells mountain climbing gear to retailers throughout the Rocky Mountain region. Kate owns 70 percent of the FPI common stock (the only class of stock outstanding) and James owns 30 percent.

FPI is located at 4200 West 400 North, Salt Lake City, Utah 84116.

FPI's Employer Identification Number is 87-5467544.

FPI's business activity is wholesale sales. Its business activity code is 423910.

Both shareholders work as employees of the corporation.

Kate is the president of FPI (Social Security number 312-89-4567). Kate's address is 1842 East 8400 South, Sandy, Utah 84094.

James is the vice president of FPI (Social Security number 321-98-7645). James's address is 2002 East 8145 South, Sandy, Utah 84094.

FPI uses the accrual method of accounting and has a calendar year-end.

Page C-11

The following is FPI's 2015 income statement:

Income Statement FPI For vear ending December 31, 2015 Revenue from sales Sales returns and allowances Cost of goods sold Gross profit from operations Of. her i noo me: Dividend income Interest income Gross income Expenses: Compensation Depreciation Bad debt expense Meals and entertainment Maintenance Business interest Propertv taxes Charitable contributions [Ether taxes Rent Advertising Professional services Emplovee benefits Supplies Other expenses Total expenses Net income $ QBDHUU l'lDDUl l'l ll 5 860.1300 55 153300 BiUU $ BBQDUU $ll l'lDUUl l14,l lll lil l1.UUUl {EDDIE} {10.121013} {31000} {28*001'3} l14,DUl lllll \"2.13001 lEJJUU} {21,l l??1.l $ 'lQDU December 31 January 1 Assets Cash $ Ei Amunts receivable 300,000 NIEM'EI nee fer deub'tful accounts lBD,DDD} II'I'I'EFIIDW 45mm State and local bands sedan Investments in stock: EZDDD Fixed assets 'IEID,DDD Ammulated depreciatibn lEDjDD} Other assets 20mm Tetal assets $595,DDD Liabilities and Sharehnlders' Equity Amunts payable $ 30,000 Other cunent liabilities 5,DDD Other liabilities 1D,DDD Capital std-dc Zj Retained earnian 320mm Tetal liabilities and shareholders equity.r $595,DDD $143,000 310,000 {53. 000i snubs 33,000 82,000 100,000 {30,000l 21,000 $543,000 $ 55,000 3.000 14mm: seems 359,000 seasons