Jamya and Manu are the shareholders of Buffalo Corporationan S Corporation. They each own 50% of BuffaloCorporation. In Year 1, Jamya and Manu eachreceived distributions of $30,000 from Buffalo Corporation. InYear 2, they received distributions each of$50,000.

Buffalo Corporation (an S Corporation) Income Statement, Dec. 31, 20x8 and 20X9	20X8(Year 1)	20X9(Year 2)
Sales revenue	$600,000	$860,000
Cost of goods sold	(80,000)	(120,000)
Salary to shareholders Manu and Jamya	(80,000)	(160,000)
Employee wages	(50,000)	(100,000)
Depreciation expense	(40,000)	(80,000)
Section 179 expense	(60,000)	(100,000)
Interest income (related to business)	24,000	45,000
Municipal bond income	3,000	8,000
Government fines	0	(4000)
Overall net income	317,000	349,000
Distributions	$60,000	$100,000

Requirements:

1. Determine and explain the amount of ordinary income andseparately stated items allocated to them for Year1 based on the information given in the table above. Assume thatBuffalo Corporation has qualified property with an unadjusted basisof $400,000.
2. Using ProConnect and/or fill in forms,complete the S Corporation Form 1120S, Schedule K for Year1 and Schedule K-1 forJamya.
3. Determine and explain the amount of ordinary income andseparately stated items are allocated to them for Year2 based on the information given in the table above,assuming Buffalo Corp has qualified property with an unadjustedbasis of $400,000.
4. Using ProConnect and/or fill in forms,complete the S Corporation Form 1120S, Schedule K for Year2 and Schedule K-1 for Manu.

Submit a Schedule K, and one Schedule K-1 for Jamya and one forManu and a Word document for questions a), and b), or one Worddocument with embedded Schedule K, and Schedule K-1 in thedocument.