Khaki Company is a Subchapter S corporation.It properly reported net income of $100,000 for financial statement purposes.It had charitable contributions of $5,000 and dividend income of $10,000 from a large domestic publicly traded company.What is the ordinary business income of Khaki Company that will be reported to its shareholders on Schedule K-1?

Question

Quizplus · Accepted Answer

The ordinary business income of Khaki Company is calculated by subtracting the charitable contributions and dividend income from the reported net income. Therefore, the ordinary business income is $100,000 - $5,000 - $10,000 = $85,000. However, since Khaki Company is a Subchapter S corporation, this income is passed through to the shareholders on Schedule K-1. The shareholders will also receive their share of any deductions, losses, and credits from the company. Therefore, the amount reported to the shareholders on Schedule K-1 will be $95,000 ($85,000 ordinary business income + $10,000 dividend income).

Khaki Company Is a Subchapter S Corporation