Charles and Mary formed CM Partnership on January 1 of the current year. Charles contributed Inventory A with a $100,000 FMV and a $70,000 adjusted basis for a 40% interest,
and Mary contributed $150,000 cash for a 60% interest. The partnership operates on a calendar year. The partnership used the cash to purchase equipment for $50,000,
Inventory B for $80,000, and stock in ST Corporation for $5,000. The partnership used the remaining $15,000 for operating expenses and borrowed another $5,000 for operating expenses.
During the year, the partnership sold one-half of Inventory A for $60,000 (tax basis, $35,000), one-half of Inventory B for $58,000 (tax basis, $40,000), and the ST stock for $6,000.
The partnership claimed $7,000 of depreciation on the equipment for both tax and book purposes. Thus, for the year, the partnership incurred the following items:
Sales-Inventory A	$60,000
Sales-Inventory B	$58,000
COGS-Inventory A	$35,000
COGS-Inventory B	$40,000
Operating Expenses	$20,000
Depreciation	$7,000
Short-Term Capital Gain	$1,000
Interest on Business Loan	$500
On December 31 of the current year, the partnership made a $1,000 principal payment on the loan and distributed $2,000 cash to Charles and $3,000 cash to Mary.
a.) Provide beginning and ending balance sheets using tax numbers
b.) Provide beginning and ending balance sheets using book numbers