KLMN Partnership’s financial records show the following: Gross receipts from sales$ 670,000Cost of goods sold(460,000)Operating expenses(96,800)Business meals not provided by a restaurant(6,240)Section 1231 loss on equipment sale(13,500)Charitable contribution(1,500)Distributions to partners(10,000)Mr. Ty is a 10 percent general partner in KLMN. During the year, he received a $1,000 cash distribution from KLMN.)If Mr. Ty’s adjusted basis in his KLMN interest was $45,000 at the beginning of the year, compute his adjusted basis at the end of the year. Assume that KLMN’s debt did not change during the year-Mr.Ty's adjusted basis at the beginning of year:-Ordinary business income:-Adjustments: -Mr. Ty's adjusted basis at end of year:2.) How would your basis computation change if KLMN’s debt at the end of the year was $28,000 more than its debt at the beginning of the year?

Solution:-1 Calculation of ordinary business income as follows:- Notes:- KLMN's Ordinary Business…

Answered: KLMN Partnership’s financial records…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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KLMN Partnership’s financial records show the following:

Gross receipts from sales	$ 670,000
Cost of goods sold	(460,000)
Operating expenses	(96,800)
Business meals not provided by a restaurant	(6,240)
Section 1231 loss on equipment sale	(13,500)
Charitable contribution	(1,500)
Distributions to partners	(10,000)

Mr. Ty is a 10 percent general partner in KLMN. During the year, he received a $1,000 cash distribution from KLMN.

)If Mr. Ty’s adjusted basis in his KLMN interest was $45,000 at the beginning of the year, compute his adjusted basis at the end of the year. Assume that KLMN’s debt did not change during the year

-Mr.Ty's adjusted basis at the beginning of year:

-Ordinary business income:

-Adjustments:

-Mr. Ty's adjusted basis at end of year:

2.) How would your basis computation change if KLMN’s debt at the end of the year was $28,000 more than its debt at the beginning of the year?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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