Using the information provided below, complete Kate Kleibers Schedule K-1 First Place Inc. (FPI) was formed as
Question:
Using the information provided below, complete Kate Kleiber’s Schedule K-1
First Place Inc. (FPI) was formed as a corporation on January 5, 2017, by its two owners Kate
Kleiber and James Chandler. FPI immediately elected to be taxed as an S corporation for federal
income tax purposes. FPI sells mountain climbing gear to retailers throughout the Rocky
Mountain region. Kate owns 70 percent of the FPI common stock (the only class of stock
outstanding) and James owns 30 percent, and both devote 100% of their working time to FPI.
FPI is located at 4200 West 400 North, Salt Lake City, Utah 84116.
FPI’s Employer Identification Number is 87-5467544.
FPI’s business activity is wholesale sales. Its business activity code is 423910.
Both shareholders work as employees of the corporation.
Kate is the president of FPI (Social Security number 312-89-4567). Kate’s address is
1842 East 8400 South, Sandy, Utah 84094.
James is the vice president of FPI (Social Security number 321-98-7645). James’s
address is 2002 East 8145 South, Sandy, Utah 84094.
FPI uses the accrual method of accounting and has a calendar year-end.
The following is FPI’s 2020 income statement:
FPI Income Statement
For year ending December 31, 2020
Revenue from sales $ 980,000
Sales returns and allowances (10,000)
Cost of goods sold (110,000)
Gross profit from operations $ 860,000
Other income:
Dividend income $ 15,000
Interest income 5,000
Gross income $ 880,000
Expenses:
Compensation $(600,000)
Depreciation (10,000)
Bad debt expense (14,000)
Meals (2,000)
Maintenance (8,000)
Business interest (1,000)
Property taxes (7,000)
Charitable contributions (10,000)
Other taxes (30,000)
Rent (28,000)
Advertising (14,000)
Professional services (11,000)
Employee benefits (12,000)
Supplies (3,000)
Other expenses (21,000)
Total expenses (771,000)
Net income $ 109,000
Notes:
1. FPI’s purchases during 2020 were $115,000. It values its inventory based on cost using
the FIFO inventory cost flow method. Assume the rules of §263A do not apply to FPI,
and that the company did not make any changes in the way it measures or tracks
inventory during 2020.
2. Of the $5,000 interest income, $2,000 was from a West Jordan city bond used to fund
public activities (issued in 2017) and $3,000 was from a money market account.
3. FPI’s dividend income comes from publicly traded stocks that FPI has owned for two
years.
4. FPI’s compensation is as follows
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood