Question

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, 2011, its date of incorporation. The following information was taken from the company's 2018 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)	(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, 2018		December 31, 2018
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 (not reported on Form 1099-DIV and made based on percentage of ownership):	$100,000
Beginning balance, Accumulated adjustments account:	$111,148

Complete the additional continuation statement from form 1120 S: Income Tax Return For S Corporation,

Form 1120S: S-Corporation Tax Return
Sch K, Line 17d (I), Other Items and Amounts	Continuation Statement

Code	Description	Amount
V	Section 199A income
W	Section 199A W-2 wages
Total

I need help with Schedule K-1 for John Parsons and George Smith,

Other deductions

Items affecting shareholder basis

Answer 1

Form 1120 S for John parsons and george Smith Particulars Amount ($) Schedule K1 for John parsons and george Smith $2,410,000 $736,741 $1,637,259 $4,797 John parsons(70%) George smith (30%) Amount ($) Amount ($) $0 $479,131 $70,000 $70,000 $75,000 Income Income operating income interest income distribution to shareholders officers salary Deductions Charitable contributions other deductions $205,342 $30,000 $30,000 $75,000 $1,673,259 $150,000 $442,103 $206,106 1 Gross Sales 2 C.O.G.S 3 Gross profit(1-2) 4 Net gain 5 other income 6 total income 7 compensation of offices 8 salaries and wages 9 repairs 10 bad debts 11 Rent 12 Taxes 13 Interest 14 Depriciation 15 Advertising 16 Pension, profit sharing plans 17 Payroll panelties 18 Total deductions(7 to 17) ordinary business income (6-18) | ($14,000) ($41,929) ($6,000) ($17,970) Income (Loss) $638,202 $316,372 $40,000 $65,101 $35,222 $15,254 $20,000 $15,000 $799,786 $684,473