The operating results for Peep Corporation, an S corporation, for last year were as follows:
Revenues
Gross sales............................$2,000,000
Tax-exempt bond interest.................2,000
Dividend income...........................8,000
Section 1231 gain (land)..................10,000
Expenses
Cost of goods sold.................$900,000
Salaries................................600,000
Rent...................................200,000
Utilities.................................60,000
Depreciation...........................40,000
Charitable contribution..............12,000
Section 179 expense................20,000
a. Determine the corporation's net income and its separately stated items.
b. Determine the corporation's financial accounting income if the gain on the sale of the land is only $6,000 and depreciation is $32,000 under financial accounting rules.
c. Complete a Schedule M-l for the corporation. You can obtain forms from the IRS Web site (www.irs.gov). Sample filled-in forms are in Appendix C of this text.