[The following information applies to the questions displayed below.] Julio and Milania are owners of...
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Accounting
[The following information applies to the questions displayed below.]
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 $14,000 from Falcons Corporation.
Falcons Corporation (an S Corporation)
Income Statement
December 31, Year 1 and Year 2
Year 1
Year 2
Sales revenue
$ 330,000
$ 460,000
Cost of goods sold
(42,000)
(65,000)
Salary to owners Julio and Milania
(40,000)
(80,000)
Employee wages
(30,000)
(60,000)
Depreciation expense
(20,000)
(40,000)
Section 179 expense
(30,000)
(50,000)
Interest income (related to business income)
10,000
18,500
Municipal bond income
1,300
3,600
Government fines
0
(3,000)
Overall net income
$ 179,300
$ 184,100
Distributions
$ 28,000
$ 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 $230,000 of qualified property (unadjusted basis).
Answer & Explanation
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