d. Using the operating results, what are Slicenhook's ordinary Income and separately stated Items for 2024 and 2025? What amount of Slicenhook's Income for each period would each of the partners receive? Note: Round your Intermediate calculations and final answers to the nearest whole dollar amount. Ordinary Income: Sales Cost of goods sold Operating expenses Depreciation Interest expense Total ordinary income Separately Stated Items: Qualified dividends Tax-exempt interest $179 expense Fines and penalties Non-deductible Meals Net Earnings from Self-Employment Distributions QBI Slicenhook Total Each Partner's share 2024 2025 2024 2025 Carrie D'Lake, Reed A. Green, and Doug A. Divot share a passion for golf and decide to go into the golf club manufacturing business together. On January 2, 2024, D'Lake, Green, and Divot form the Slicenhook Partnership, a general partnership. Slicenhook's main product will be a perimeter-weighted titanium driver with a patented graphite shaft. All three partners plan to actively participate in the business. The partners contribute the following property to form Slicenhook: Partner Carrie D'Lake Contribution Land, FMV $ 515,000 Basis $515,000, Mortgage $ 60,000 Reed A. Green Doug A. Divot Cash Cash $ 455,000 $ 455,000 Carrie had recently acquired the land with the idea that she would contribute it to the newly formed partnership. The partners agree to share in profits and losses equally. Slicenhook elects a calendar year-end and the accrual method of accounting. In addition, Slicenhook received a $1,533,000 recourse loan from Big Bank at the time the contributions were made. Slicenhook uses the proceeds from the loan and the cash contributions to build a state-of-the-art manufacturing facility ($1,255,000), purchase equipment ($633,000), and produce Inventory ($422,000). With the remaining cash, Slicenhook Invests $67,000 in the stock of a privately owned graphite research company and retains ($66,000) as working cash. Slicenhook operates on a just-in-time Inventory system, so it sells all Inventory and collects all sales immediately. That means that at the end of the year, Slicenhook does not carry any Inventory or accounts receivable balances. During 2024, Slicenhook has the following operating results: Sales Cost of goods sold Interest income from tax-exempt bonds Qualified dividend income from stock Operating expenses Depreciation (tax) §179 on equipment Equipment Building Interest expense on debt $ 1,214,000 422,000 1,010 1,830 137,000 $ 39,000 92,000 35,000 166,000 131,000 The partnership is very successful in its first year. The success allows Slicenhook to use excess cash from operations to purchase $48,000 of tax-exempt bonds (you can see the Interest income already reflected in the operating results). The partnership also makes a principal payment on its loan from Big Bank In the amount of $333,000 and a distribution of $100,000 to each of the partners on December 31, 2024. The partnership continues its success in 2025 with the following operating results: Sales Cost of goods sold Interest income from tax-exempt bonds Qualified dividend income from stock Operating expenses Depreciation (tax) Equipment Building Interest expense on debt $ 1,288,000 442,000 1,010 1,830 154,000 $ 169,000 41,000 210,000 107,000 The operating expenses Include a $2,350 trucking fine that one of its drivers Incurred for reckless driving and speeding and meals expense of $6,000. By the end of 2025, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership Interest, Indie Ruff. Indie has agreed to purchase Reed's Interest in Slicenhook for $807,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indle to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's Interest on January 1, 2026. As of January 1, 2026, Slicenhook has the following assets: Cash Tax Basis $ 921,680 FMV $ 921,680 40,000 Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation Land Total 48,000 67,000 333,000 1,179,000 515,000 $ 3,063,680 67,000 633,000 1,660,000 620,000 $ 3,941,680 Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership Interest: Cash Investment stock Equipment-$211,000 cost, net of depreciation Total Tax Basis $ 529,000 67,000 111,000 $ 707,000 FMV $ 529,000 67,000 211,000 $ 807,000 Slicenhook has not purchased or sold any equipment since its original purchase just after formation.

d. Using the operating results, what are Slicenhook's ordinary Income and separately stated Items for 2024 and 2025? What amount of Slicenhook's Income for each period would each of the partners receive? Note: Round your Intermediate calculations and final answers to the nearest whole dollar amount. Ordinary Income: Sales Cost of goods sold Operating expenses Depreciation Interest expense Total ordinary income Separately Stated Items: Qualified dividends Tax-exempt interest $179 expense Fines and penalties Non-deductible Meals Net Earnings from Self-Employment Distributions QBI Slicenhook Total Each Partner's share 2024 2025 2024 2025 Carrie D'Lake, Reed A. Green, and Doug A. Divot share a passion for golf and decide to go into the golf club manufacturing business together. On January 2, 2024, D'Lake, Green, and Divot form the Slicenhook Partnership, a general partnership. Slicenhook's main product will be a perimeter-weighted titanium driver with a patented graphite shaft. All three partners plan to actively participate in the business. The partners contribute the following property to form Slicenhook: Partner Carrie D'Lake Contribution Land, FMV $ 515,000 Basis $515,000, Mortgage $ 60,000 Reed A. Green Doug A. Divot Cash Cash $ 455,000 $ 455,000 Carrie had recently acquired the land with the idea that she would contribute it to the newly formed partnership. The partners agree to share in profits and losses equally. Slicenhook elects a calendar year-end and the accrual method of accounting. In addition, Slicenhook received a $1,533,000 recourse loan from Big Bank at the time the contributions were made. Slicenhook uses the proceeds from the loan and the cash contributions to build a state-of-the-art manufacturing facility ($1,255,000), purchase equipment ($633,000), and produce Inventory ($422,000). With the remaining cash, Slicenhook Invests $67,000 in the stock of a privately owned graphite research company and retains ($66,000) as working cash. Slicenhook operates on a just-in-time Inventory system, so it sells all Inventory and collects all sales immediately. That means that at the end of the year, Slicenhook does not carry any Inventory or accounts receivable balances. During 2024, Slicenhook has the following operating results: Sales Cost of goods sold Interest income from tax-exempt bonds Qualified dividend income from stock Operating expenses Depreciation (tax) §179 on equipment Equipment Building Interest expense on debt $ 1,214,000 422,000 1,010 1,830 137,000 $ 39,000 92,000 35,000 166,000 131,000 The partnership is very successful in its first year. The success allows Slicenhook to use excess cash from operations to purchase $48,000 of tax-exempt bonds (you can see the Interest income already reflected in the operating results). The partnership also makes a principal payment on its loan from Big Bank In the amount of $333,000 and a distribution of $100,000 to each of the partners on December 31, 2024. The partnership continues its success in 2025 with the following operating results: Sales Cost of goods sold Interest income from tax-exempt bonds Qualified dividend income from stock Operating expenses Depreciation (tax) Equipment Building Interest expense on debt $ 1,288,000 442,000 1,010 1,830 154,000 $ 169,000 41,000 210,000 107,000 The operating expenses Include a $2,350 trucking fine that one of its drivers Incurred for reckless driving and speeding and meals expense of $6,000. By the end of 2025, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership Interest, Indie Ruff. Indie has agreed to purchase Reed's Interest in Slicenhook for $807,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indle to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's Interest on January 1, 2026. As of January 1, 2026, Slicenhook has the following assets: Cash Tax Basis $ 921,680 FMV $ 921,680 40,000 Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation Land Total 48,000 67,000 333,000 1,179,000 515,000 $ 3,063,680 67,000 633,000 1,660,000 620,000 $ 3,941,680 Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership Interest: Cash Investment stock Equipment-$211,000 cost, net of depreciation Total Tax Basis $ 529,000 67,000 111,000 $ 707,000 FMV $ 529,000 67,000 211,000 $ 807,000 Slicenhook has not purchased or sold any equipment since its original purchase just after formation.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter19: Accounting For Partnerships

Section: Chapter Questions

Problem 1MP

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