Tax Return Problem 1. John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111120), 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 2019 income statement. Interest income $ 100,000 Gross sales receipts 2,410,000 Beginning inventory 9,607 Direct labor Direct materials purchased (203,102) (278,143) (249,356) Direct other costs Ending inventory 3,467 Salaries and wages Officers' salaries ($75,000 each to Parsons and Smith) Repairs Depreciation expense, tax and book (442,103) (150,000) (206,106) (15,254) Interest expense Rent expense (operating) (35,222) (40,000) (65,101) Taxes Charitable contributions (cash) Advertising expenses Payroll penalties (20,000) (20,000) (15,000) (59,899) 704,574 Other deductions Book income A comparative balance sheet appears below. January 1, 2019 December 31, 2019 Cash Accounts receivable Inventories Prepaid expenses Building and equipment Accumulated depreciation Land Total assets $ 47,840 93,100 9,607 8,333 138,203 (84,235) 2,000 $214,848 $ ? 123,104 3,467 17,582 185,348 (?) 2,000 $844,422 Accounts payable Notes payable (less than 1 year) Notes payable (more than 1 year) Capital stock Retained earnings Total liabilities and capital $ 42,500 4,500 26,700 30,000 111,148 $214,848 $ 72,300 2,100 24,300 30,000 ? $844,422 Premium's accounting firm provides the following additional information. Distributions to shareholders $100,000 111,148 Beginning balance, Accumulated adjustments account Ordinary business income for QBI W-2 wages for QBI 639,574 795,205 Prepare Premium's Form 1120S and Schedule K-1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. Do not complete the Forms 1125-A, 1125-E, and 4562. Suggested software: ProConnect Tax Online