Assignment: Comprehensive Tax Return
CORPORATION (FORM 11205)
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. Premium's S election was made on January 15, 2009, its date of incorporation. The following information was taken from the company's 2015 income statement.
|
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 ($75,000 each to Parsons and Smith)
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(150,000)
|
|
Repairs
|
(206,106)
|
|
Depreciation expense, tax and book
|
(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, 2015
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December 31, 2015
|
|
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
Beginning balance, Accumulated adjustments account $111,148
Using the preceding information, prepare a complete Form 1120 and Schedule K-1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. Do not complete the Form 4562. If any information is missing, make realistic assumptions.