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 offs during the year.

A- What is ABC Company’s ordinary business income?

B- What are its 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

D- What are its beginning and ending balance sheets for book purposes (as would go on Schedule L, Form 1065?)