In this scenario, you will practice entering the following: Balance Sheet Trial Balance Partnership Tax Return Project ACCTG 410 SCENARIO INFORMATION Gary Keiter and Donna Koch, both United States citizens, formed the K&K General Partnership on March 1, 2015, to provide computer consulting services. PARTNERSHIP INFORMATION NAME K&K General Partnership EIN 32-6584221 ADDRESS 3010 East Dunder Mifflin Street Scranton, PA 18505 ACCOUNTING METHOD Cash YEAR-END Calendar (12/31) BUSINESS CODE 7370 PARTNER INFORMATION NAME Gary Keiter SSN 324-25-8911 ADDRESS 1521 Slough Street Scranton, PA 18505 PROFIT/LOSS % 60% NAME Donna Koch SSN 671-34-8789 ADDRESS 3315 East Slough Street Scranton, PA 18505 PROFIT/LOSS % 40% Instructions This practice return will help you become more familiar with partnership return preparation. Use the scenario information and the attached source documents to complete the 2022 Federal Form 1065 including Schedule K and Schedule M (even though not required by the IRS instructions to Form 1065) and any schedules necessary. Additionally, prepare a Schedule K-1 for Gary. Do not prepare Schedule K-1 or other required supplemental forms for Donna at this time. Forms may be obtained at www.irs.gov. For any information not provided, please use reasonable assumptions. Attached Source Documents Balance Sheet Trial Balance ADDITIONAL INFORMATION The partnership provided the following notes: The Investments account consists of marketable securities of U.S. corporations and U.S. Treasury Bonds. All of the dividends are considered qualified dividends. Equipment was sold May 12, 2022 for $9,800. It was purchased new on May 1, 2021 for $10,000 and its basis when sold was $6,300. New equipment was purchased March 1, 2022 with $5,000 cash and a $35,000 three-year recourse note payable. The first note payable is March 1, 2023. (Note: the correct amount of tax depreciation is included in the depreciation expense account on the trial balance.) Notes Payable are long-term except for $20,000 of the recourse notes to be paid next year. All liabilities were created by the partnership. The partners drawing accounts record cash distributions made to partners throughout the year. Compensation is composed of guaranteed payments of $30,000 each to Gary and Donna and $50,000 to unrelated employees. Health insurance premiums paid were for the unrelated employees. FINANCIAL INFORMATION The December 31, 2021 Balance Sheet and December 31, 2022 Trial Balance (both prepared for tax purposes) for the partnership are given below. K & K GENERAL PARTNERSHIP BALANCE SHEET TRIAL BALANCE 12/31/2021 12/31/2022 Debit Credit Debit Credit Cash $ 12,000 $ 22,000 Investments 14,000 14,000 Equipment 150,000 190,000 Accumulated Depreciation $ 38,000 $ 63,500 Recourse Notes Payable 58,000 87,200 Nonrecourse Notes Payable 36,000 30,000 Gary, Capital 28,000 28,000 Gary, Drawing 25,440 Donna, Capital 16,000 16,000 Donna, Drawing 16,960 Revenues 235,000 Dividend Income 1,000 Interest Income 400 1245 Gain (depreciation recapture) 3,500 Compensation 110,000 Rent Expense 12,000 Interest Expense 16,600 Tax Expense (property & payroll) 13,800 Repair Expense 5,800 MACRS Depreciation 29,200 Health Insurance Expense 1,600 Property Insurance Expense 1,500 Office Supplies Expense 3,000 Utilities Expense 2,200 Charitable Contribution 500 Total $ 176,000 $ 176,000 $ 464,600 $ 464,600