Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $15,000 from Falcons Corporation. Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Year 1 Sales revenue $ 300,000 Year 2 $ 430,000 Cost of goods sold Salary to owners Julio and Milania (40,000) (60,000) (40,000) (80,000) Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income (25,000) (50,000) (20,000) (40,000) (30,000) (50,000) Government fines Overall net income Distributions 12,000 1,500 0 $ 158,500 22,500 4,000 (2,000) $ 174,500 $ 30,000 $ 50,000 a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above? Assume that Falcons Corporation has $200,000 of qualified property (unadjusted basis). Ordinary Income Section 179 expense Qualified business income Amount Allocated to Julio Allocated to Milania 30,000 15,000 15.000 Municipal bond income Distributions Allocated wages 1,500 750 750 $ 30,000 $ 15,000 $ 15,000 $ 65,000 $ 6A 32,500 $ 32,500 Unadjusted basis of qualified property $ 200,000 $100,000 $ 100,000
Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $15,000 from Falcons Corporation. Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Year 1 Sales revenue $ 300,000 Year 2 $ 430,000 Cost of goods sold Salary to owners Julio and Milania (40,000) (60,000) (40,000) (80,000) Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income (25,000) (50,000) (20,000) (40,000) (30,000) (50,000) Government fines Overall net income Distributions 12,000 1,500 0 $ 158,500 22,500 4,000 (2,000) $ 174,500 $ 30,000 $ 50,000 a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above? Assume that Falcons Corporation has $200,000 of qualified property (unadjusted basis). Ordinary Income Section 179 expense Qualified business income Amount Allocated to Julio Allocated to Milania 30,000 15,000 15.000 Municipal bond income Distributions Allocated wages 1,500 750 750 $ 30,000 $ 15,000 $ 15,000 $ 65,000 $ 6A 32,500 $ 32,500 Unadjusted basis of qualified property $ 200,000 $100,000 $ 100,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In
year 1, Julio and Milania each received distributions of $15,000 from Falcons Corporation.
Falcons Corporation (an S Corporation)
Income Statement
December 31, Year 1 and Year 2
Year 1
Sales revenue
$ 300,000
Year 2
$ 430,000
Cost of goods sold
Salary to owners Julio and Milania
(40,000)
(60,000)
(40,000)
(80,000)
Employee wages
Depreciation expense
Section 179 expense
Interest income (related to business income)
Municipal bond income
(25,000)
(50,000)
(20,000)
(40,000)
(30,000)
(50,000)
Government fines
Overall net income
Distributions
12,000
1,500
0
$ 158,500
22,500
4,000
(2,000)
$ 174,500
$ 30,000
$ 50,000
a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above?
Assume that Falcons Corporation has $200,000 of qualified property (unadjusted basis).
Ordinary Income
Section 179 expense
Qualified business income
Amount
Allocated to
Julio
Allocated to
Milania
30,000
15,000
15.000
Municipal bond income
Distributions
Allocated wages
1,500
750
750
$
30,000 $ 15,000 $
15,000
$
65,000 $
6A
32,500 $
32,500
Unadjusted basis of qualified property
$ 200,000
$100,000
$
100,000
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