Bonnie Mush is an officer with Mush Fitness and receives a $40,000 salary from t
ID: 2587929 • Letter: B
Question
Bonnie Mush is an officer with Mush Fitness and receives a $40,000 salary from the business. During 2016, Mush had the following income and (expenses)
Service Income$62,675, Customer refunds ($550), Interest income $6,250, Qualified dividend income$350 , Facility rental:(12,000), Office salary ($40,000), Other salaries ($8,000), Fitness Supplies ($750), Laundry services ($1200), Towels ($270), Mats ($537).
1.Where should interest income be reported on the Form 1120S?
2. What is the income/loss reconciliation amount that should be reported on line 18 of Schedule K?
3. What is the ordinary income (loss) Mush fitness should report on line 21 of the Form 1120 S?
4. What is the total income reported on the Form 1120S, line 6?
Explanation / Answer
1.Where should interest income be reported on the Form 1120S?
Answer: Interest income needs to show in line 4 of Schedule K of Form 1120 S.
2. What is the income/loss reconciliation amount that should be reported on line 18 of Schedule K?
Answer: Income /Loss reconcilation reported in line 18 implies shareholders share in income of S corporation and deduction and credit from the same.
3. What is the ordinary income (loss) Mush fitness should report on line 21 of the Form 1120 S?
Ordinary income that needs to report in the line 21 is $45,968.
Note : Salary to Mash in no allowed as deduction.
4. What is the total income reported on the Form 1120S, line 6?
Answer- Total income that need to report in line 6 of form 1120S is $68,725.
Servie Income 62,675 Less: Return to Customer 550 Net Service Income 62,125 Dividend and Interest Income 6,600 Total Income 68,725 Expenses Rent 12,000 Salary 8,000 Fitness Supplies 750 Laundary Service 1,200 Towels 270 Mats 537 Total Expenses 22,757 Taxable Income (Tota Income-Total Expenses) 45,968