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Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent...

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Accounting

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

Sales revenue $ 300,000 $ 430,000

Cost of goods sold (40,000) (60,000)

Salary to owners Julio and Milania (40,000) (80,000)

Employee wages (25,000) (50,000)

Depreciation expense (20,000) (40,000)

Section 179 expense (30,000) (50,000)

Interest income (related to business income) 12,000 22,500

Municipal bond income 1,500 4,000

Government fines 0 (2,000)

Overall net income $ 158,500 $ 174,500

Distributions $ 30,000 $ 50,000

Problem 22-52 Part a (Static) 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).

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