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 $12,000 from Falcons Corporation. Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Sales revenue Cost of goods sold Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income Distributions Year 1 $ 335,000 (42,000) (48,000) (30,000) (20,000) (30,000) 12,000 1,808 8 $ 186,809 $ 24,000 Year 2 $ 465,000 (64,009) (80,000) (60,000) (40,000) (50,000) 22,500 4,600 (3,000) $ 195,100 $ 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 $240,000 of qualified property (unadjusted basis).

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 $12,000 from Falcons Corporation. Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Sales revenue Cost of goods sold Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income Distributions Year 1 $ 335,000 (42,000) (48,000) (30,000) (20,000) (30,000) 12,000 1,808 8 $ 186,809 $ 24,000 Year 2 $ 465,000 (64,009) (80,000) (60,000) (40,000) (50,000) 22,500 4,600 (3,000) $ 195,100 $ 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 $240,000 of qualified property (unadjusted basis).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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