Adam, Barbara and Charlotte formed the equal ABC partnership; Adam and Barbara each contributed cash of $100,000 and Charlotte contributed land worth $130,000 with a basis of $120,000 and subject to a mortgage of $30,000. In the first year, (using cash basis for tax purposes) they had the following for tax purposes:
Sales- $400,000
Purchase of inventory- $180,000
Ending inventory- 40,000
Depreciation- 30,000
Section 179 Expense- 25,000
Salaries- 40,000
Guaranteed payment to Adam- 15,000
Purchase of Equipment- 150,000
Rent Expense- 20,000
Interest Income- 5,000
Mortgage Interest Expense- 1,500
Dividends- 1,000
Ending Accounts Rec- 35,000
Depreciation for book purposes was $20,000, and they had a bad debt accrued expense of $4,000 for book purposes, but not actual charge off's during the year.
A- What is ABC's company's ordinary business income?
B- What are it's separately stated items? (those that go on Schedule K?)
C- Compute total tax net income, including separately stated items, and reconcile it with book net income (The M01 reconciliation would be the reverse)
D- What are it's beginning and ending balance sheets for book purposes (as would go on Schedule L, Form 1065?)