The AS Corporation (a hypothetical company) was formed and began operations on January 1, 2020, and is owned by Ann Smith, who owns 50% of the stock. There is one other shareholder who owns the rest of the stock. Assume that the corporation has a valid S corporation election in effect for 2020. Ann lives at 1 Ocean Blvd, Brighton Beach NY 12570, she owns 100 shares of stock. The business is a hair salon.

The corporation follows the accrual method of accounting and is not subject to any special taxes. The address of the corporation is 2000 Main St, Brooklyn, NY 12870; and employer Identification number (EIN) is 98- 515234

You are provided with the following year-end financial statements for the AS Corporation.

 

AS Corporation

Income Statement

For the Year Ended December 31, 2020

Gross Sales $300,000

Qualified Dividends (10% owned investee) 12,000

Cost of Goods Sold 85,000

Total Income 227,000

Officer Compensation 50,000

Salaries and Wages 40,000

Payroll Taxes 15,000

Rent 20,000

Depreciation Expense (book and tax) 5,000

Repairs 2,000

Net Income $95,000

 

AS Corporation

Balance Sheet

December 31, 2020

Cash $ 10,000

Inventory 50,000

Land 20,000

Building 130,000

Less: Accumulated Depreciation 5,000

Total Assets $205,000

Accounts Payable $20,000

Common Stock 100,000

Retained Earnings 85,000

Total Liabilities & Equity 205,000

Note: No estimated tax payments have been made for 2020. Both shareholders contributed $50,000 to start up the corporation, and each received a $5,000 cash distribution.

 

Instructions:

Complete the 2021 Form 1120S for the AS Corporation and the Schedule K-1 for Ann Smith.