Background:

Complete the 2019 Better Times Form 1065, pages 1-5, K-1 for Ripley, and form 4562.

1. Ripley owned a lawn and garden shop. Bill owned a hydroseeding business. Ripley and Bill decided to go into business together, under the name Better Times. After consulting with an attorney about the choice of entity, they decided to form an LLC and be taxed as a partnership. The attorney helped them draft a partnership agreement. The attorneys fee was $2,000.
2. They also talked with a CPA. The CPA obtained an EIN (Employer Identification Number) for the business. The EIN is 31-1234567. The CPA also instructed them to open a business checking account and to make cash contributions to the account. The CPAs fee was $2,500.
3. The business start date was January 1, 2019. There was no COVID-19 shutdown that spring. Ripley and Bill spent $1,660 visiting prospective suppliers before the business start date.
4. According to the partnership agreement, Ripley and Bill are 50/50 partners. They each contributed $50,000 into the partnership. Their distributive shares will be allocated based on the ratio of capital contributions.
5. Better Times purchased and placed in service the following assets on April 1, 2019. They will take 179 only on the hydroseeding equipment and will use MACRS on the other assets.

Hydroseeding equipment	$23,600
Display shelving	$8,950
Office furniture	$3,675
Computers	$3,890
TOTAL	$40,115

6. Please see the Better Times spreadsheet for the income statement and balance sheet.

Better Times LLC Balance Sheet
As of December 31, 2019
Assets
Cash	$166,811.00
Inventory	$9,100.00
Equipment	$23,600.00
Display Shelving	$8,950.00
Office Furniture	$3,675.00
Computers	$3,890.00
Accumulated Depreciation	$(25,352.00)
Total Assets	$190,674.00
Liabilities
Payroll tax withholding payable	$464.00
Sales tax payable	$1,235.00
Loan payable	$20,459.00
Total Liabilities	$22,158.00
Equity
Capital Contributions	$100,000.00
Current earnings	$78,516.00
Distributions to partners	$(10,000.00)
Total Equity	$168,516.00
Total Liabilities and Equity	$190,674.00

Better Times LLC Income Statement
Year ending December 31, 2019
Revenue
Lawn and garden sales	$215,500.00
Hydroseeding services	$212,450.00
Interest earned	$566.00
Gross Income	$428,516.00
Purchases	$74,025.00
Gross profit	$354,491.00
Expenses
Accounting (organizational costs)	$2,500.00
Advertising	$3,000.00
Attorney fees (organizational costs)	$2,000.00
Bookkeeping	$2,800.00
Depreciation	$25,352.00
Employee wages	$88,920.00
Employee benefits	$21,000.00
Guaranteed payments to partners	$100,000.00
Insurance on business	$3,250.00
Interest expense	$919.00
Meals	$1,100.00
Office expenses	$2,325.00
Payroll Taxes	$9,299.00
Rent	$9,000.00
Travel and lodging (start-up costs)	$1,660.00
Utilities	$2,850.00
Total expenses	$275,975.00
Net income per books	$78,516.00