TAX RETURN PROBLEM 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. 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 $ 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 $100,000 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 information is missing, make realistic assumptions.

TAX RETURN PROBLEMS 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. 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 $ 47,840 $? Accounts receivable 93,100 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 $214,848 123,104 ? $844,422 Premium's accounting firm provides the following additional information. Distributions to shareholders $100,000 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 information is missing, make realistic assumptions