Required information While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2021, and each contributed $250,000 in exchange for a 50 percent ownership interest. GTE also borrowed $1,000,000 from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2021 activities: •GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis. • GTE received $1,450,000 of sales revenue and reported $680,000 of cost of goods sold (it did not have any ending Inventory). • GTE paid $130,000 compensation to James, $130,000 compensation to Paul, and $140,000 of compensation to other employees (assume these amounts include applicable payroll taxes, if any). •GTE paid $35,000 of rent for a building and equipment, $40,000 for advertising. $70,000 in interest expense, $6,000 for utilities, and $4,000 for supplies. GTE contributed $15,000 to charity. • GTE received a $5,000 qualified dividend from a great stock investment (it owned 2 percent of the corporation distributing the dividend), and it recognized $3,500 in short-term capital gain when it sold some of the stock. On December 1, 2021, GTE distributed $40,000 to James and $40,000 to Paul. GTE has qualified property of $320,000 (unadjusted basis). (Leave no answer blank. Enter zero if applicable. Enter N/A if not applicable.) a-1. Assume James and Paul formed GTE as an S corporation. Complete GTE's Form 1120-S, page 1; Form 1120-S, Schedule K. Use 2021 tex rules regardless of year on tox ferm
Required information While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2021, and each contributed $250,000 in exchange for a 50 percent ownership interest. GTE also borrowed $1,000,000 from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2021 activities: •GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis. • GTE received $1,450,000 of sales revenue and reported $680,000 of cost of goods sold (it did not have any ending Inventory). • GTE paid $130,000 compensation to James, $130,000 compensation to Paul, and $140,000 of compensation to other employees (assume these amounts include applicable payroll taxes, if any). •GTE paid $35,000 of rent for a building and equipment, $40,000 for advertising. $70,000 in interest expense, $6,000 for utilities, and $4,000 for supplies. GTE contributed $15,000 to charity. • GTE received a $5,000 qualified dividend from a great stock investment (it owned 2 percent of the corporation distributing the dividend), and it recognized $3,500 in short-term capital gain when it sold some of the stock. On December 1, 2021, GTE distributed $40,000 to James and $40,000 to Paul. GTE has qualified property of $320,000 (unadjusted basis). (Leave no answer blank. Enter zero if applicable. Enter N/A if not applicable.) a-1. Assume James and Paul formed GTE as an S corporation. Complete GTE's Form 1120-S, page 1; Form 1120-S, Schedule K. Use 2021 tex rules regardless of year on tox ferm
Chapter21: Partnerships
Section: Chapter Questions
Problem 59P
Related questions
Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
Question
Transcribed Image Text:a-2. Complete Paul's 1120-S, Schedule K-1 for year 1. Use 2021 tax rules regardless of year on tax form.
Employer Identification Number:
Good to Eat EIN: 58-1111111
S Corporation EIN: 59-2222222
Shareholder's identifying number: 111-11-1111
Transcribed Image Text:Required information
While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing
careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for
weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2021, and each
contributed $250,000 in exchange for a 50 percent ownership interest. GTE also borrowed $1,000,000 from a local bank.
Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The
following information pertains to GTE's 2021 activities:
GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year
basis.
• GTE received $1,450,000 of sales revenue and reported $680,000 of cost of goods sold (it did not have any ending
Inventory).
• GTE paid $130,000 compensation to James, $130,000 compensation to Paul, and $140,000 of compensation to other
employees (assume these amounts include applicable payroll taxes, if any).
• GTE paid $35,000 of rent for a building and equipment, $40,000 for advertising, $70,000 in interest expense, $6,000
for utilities, and $4,000 for supplies.
GTE contributed $15,000 to charity.
• GTE received a $5,000 qualified dividend from a great stock investment (it owned 2 percent of the corporation
distributing the dividend), and it recognized $3,500 in short-term capital gain when it sold some of the stock.
• On December 1, 2021, GTE distributed $40,000 to James and $40,000 to Paul.
•GTE has qualified property of $320,000 (unadjusted basis).
(Leave no answer blank. Enter zero if applicable. Enter N/A if not applicable.)
a-1. Assume James and Paul formed GTE as an S corporation.
Complete GTE's Form 1120-S, page 1; Form 1120-S, Schedule K. Use 2021 tax rules regardless of year on tax form.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you