John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premium€™s S election was made on January 15, 2010, its date of incorporation. The following information was taken from the company€™s 2016 income statement.

Interest income........................................................................$ 100,000
Gross sales receipts.................................................................2,410,000
Beginning inventory........................................................................9,607
Direct labor................................................................................(203,102)
Direct materials purchased.....................................................(278,143)
Direct other costs.....................................................................(249,356)
Ending inventory.............................................................................3,467
Salaries and wages...................................................................(442,103)
Officers€™ salaries ($75,000 each to Parsons and Smith).......(150,000)
Repairs.......................................................................................(206,106)
Depreciation expense, tax and book.......................................(15,254)
Interest expense.........................................................................(35,222)
Rent expense (operating)..........................................................(40,000)
Taxes............................................................................................(65,101)
Charitable contributions (cash)................................................(20,000)
Advertising expenses................................................................(20,000)
Payroll penalties........................................................................(15,000)
Other deductions......................................................................(59,899)
Book income..............................................................................704,574

A comparative balance sheet appears below.

Premium€™s accounting firm provides the following additional information.

Distributions to shareholders............................................................$100,000
Beginning balance, Accumulated adjustments account.................$111,148

Using the preceding information, prepare a complete Form 1120S and Schedule K€“1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. Do not complete the Form 4562. If any information is missing, make realistic assumptions.

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January 1, 2016 December 31, 2016 $ 47,840 Cash Accounts receivable 93,100 123,104 Inventories 9,607 3467 Prepaid expenses Building and equipment 8,333 17,582 138,203 185,348 Accumulated depreciation (84,235) (?) Land 2,000 $214,848 2,000 Total assets $844,422 $ 42,500 4,500 26,700 $ 72,300 Accounts payable Notes payable (less than 1 year) Notes payable (more than 1 year) 2,100 24,300 Capital stock Retained earnings Total liabilities and capital 30,000 30,000 111,148 $214,848 $844,422