Need a completed return (Form 1065) including all forms and required schedules (see attached file)

PROJECT: Given the following information, complete, in good form, all necessary forms associated with a Form 1065 - U.S. Return of Partnership Income. Two individuals are engaged in business as partners under the firm name of Bilco Products. The address of the partnership is 131 Mill St., Chicago, Illinois 60600. The partners are George A. Morgan, 789 N. Code Drive, Chicago, Illinois 60600, and Malcolm Williams, 58 Forest Drive, Chicago, Illinois 60600. Williams devotes all his time to the partnership. Morgan, who is also the tax matters partner, devotes one-fourth of his time, but his capital account is larger. At the beginning of the 2011 tax year it was $63,674; Williams' was $23,674. The partners share all income and losses equally after guaranteed payments and the interest on Morgan's excess capital investment. During 2011, Mr. Williams contributed land to the partnership worth $120,000, for which he had an adjusted basis of $70,000. The partners have agreed that Mr. Williams will be taxed on the first $50,000 of gain if the land is sold. Mr. Morgan contributed $120,000 in cash to the partnership during 2011. The partnership has no nonrecourse loan. The partnership is on the calendar-year, accrual basis. It was formed on January 2, 1983. It is engaged in the manufacture of toys. The partnership's business code number is 339900. Mr. Morgan and Mr. Williams are both general partners and they are not related. The partnership employed Robert A. Landers, 1212 Lenix, Chicago, Illinois 60600, to prepare its return, which is filed on April 11, 2012. The preparer's tax identification number is P00330124. The partnership's employer identification number is 21-8253431. Mr. Morgan's social security number is 360-92-4501, and Mr. Williams' number is 364-02-4752. TRIAL BALANCE Following is the partnership's trial balance as of the close of business on December 31, 2011: Dr. Sales ......................................................... Sales allowances ..................................... Closing inventory ...................................... Purchases ................................................. Factory wages .......................................... Factory material and supplies ................ Office and sales salaries ......................... Guaranteed payment - Morgan ............... Guaranteed payment - Williams ............. Interest on excess capital ....................... Rent ........................................................... Interest on business loans ...................... Taxes: ........................................................ Unincorporated business tax ................ Business license and inspection fees ........ Social security and employment taxes ... Bad debts ................................................. Repairs ...................................................... * Depreciation .......................................... Insurance on manufacturing operations ... Utility costs related to manufacturing .... * Utilities ................................................... * Postage .................................................. * Office expense ....................................... * Insurance ............................................... * Miscellaneous ........................................ * Meals and entertainment ..................... * Patent royalties received * Dividends ............................................... * Gain on sale of investments ................ * Interest on U. S. obligations ................. Contributions to XYZ Charity ................... Cash .......................................................... Notes and accounts receivable .............. InvestmentsGovernment obligations ... * Land ....................................................... Truck.......................................................... Office furniture ......................................... Machinery and equipment ...................... Patent........................................................ Cr. $350,466 5,400 61,000 46,300 103,000 2,126 26,000 6,000 16,800 2,400 9,771 1,050 188 200 10,222 2,000 4,836 51,720 2,470 2,430 340 550 40 500 50 4,500 886 250 6,000 520 210 78,172 23,500 5,000 120,000 20,000 10,000 170,000 40,000 1 TRIAL BALANCE (Continued) Dr. Copier ........................................................ Accumulated depreciation ...................... Accumulated amortization ...................... Accounts payable ..................................... Notes payable to bank (short-term) ....... Mortgage payable to individual (long-term)... MorganCapital account 1/1/09 .......... WilliamsCapital account 1/1/09 ......... * MorganCash contributed ................... * WilliamsLand contributed .................. * Inventory adjustment ............................ MorganWithdrawals .............................. WilliamsWithdrawals ............................. Totals ......................................................... Cr. 2,500 88,291 22,750 6,337 7,277 10,150 63,674 23,674 120,000 120,000 11,000 1,000 1,000 $831,275 $831,275 1 Depreciation: On June 14, 2010, the partnership purchased machinery that is seven-year MACRS property for $170,000. On March 2, 2009, the partnership acquired a truck for $20,000 that is five-year MACRS property. It is not subject to the annual depreciation limitations. On August 2, 2000, the partnership acquired a patent for $40,000 that is being amortized over a 20-year life. On January 2, 2009, the partnership acquired used office furniture for $10,000. The furniture is sevenyear MACRS property. The furniture did not qualify for bonus depreciation because it is used. On April 8, 2011, the partnership acquired a photocopier for $2,500. The photocopier has a five-year recovery period. The depreciation on the machinery is reflected on Schedule A and is to be included in the total of \"other costs,\" including insurance and utility costs attributable to manufacturing and materials and supplies. The depreciation deduction for the patent is treated as a deduction related to portfolio income. As such, the depreciation for the patent is reported on Schedules K and K-1 and is not reflected in the computation of trade or business income on page 1. No Code Sec. 179 expensing or bonus depreciation was taken on assets acquired in years prior to 2011. However, the partners elect Code Sec. 179 expensing for the photocopier. 2 Utilities; Postage; Office expense; Insurance; Miscellaneous; Meals and entertainment: These items should be listed on a separate schedule and attached to Form 1065 and the total entered on Line 20, page 1, \"Other deductions.\" The meals and entertainment figure of $4,500 reflects the total of such expenses incurred by the partnership for the year. 3 Patent royalties; Dividends; U.S. obligations interest: The patent royalty income of $886, the dividend income of $250, and the interest earned on the U.S. obligations of $520 represent portfolio income and, accordingly, are reported on Schedules K and K-1. All of the dividend income is qualified dividend income. 4 Securities sales: The partnership made two sales of securities in 2011. Bonds of Moran Specialty Co. were sold on January 9, 2011, for $49,000. They had been purchased on June 5, 2008, for $40,000. The partnership also sold 50 shares of Harper Lumber Co. stock for $47,000 on January 24, 2011. This stock had been purchased on September 5, 2008, for $50,000. These are portfolio income transactions. Land and cash contributed: Mr. Williams' land contribution is to be listed in the ending balance sheet (Schedule L) and in Schedule M-2 of Form 1065 at its fair market value of $120,000. 5 6 Inventory adjustment: This amount represents the decrease in cost of goods sold by reason of the increase in the inventory at the close of the year over that at the beginning of the year. The amount of $11,000 itself should not appear on Form 1065. The inventory valuation method used is lower of cost or market, and there was no change in the manner of valuing the inventories in 2011. * Self-employment net earnings: The combined net earnings from self-employment for both partners must be computed and entered on Schedule K of Form 1065. The individual partner's net earnings are reported on Schedule K-1. A 1099INT was issued to Mr. Morgan for $2,400. 2 BALANCE SHEET The firm's balance sheet, as of January 1, 2011, was as follows: ASSETS Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ 7,274 Trade notes and accounts receivable . . . . . . . . . . . . . . . 21,000 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 Investments in government obligations . . . . . . . . . .. . . . . 5,000 Investments in corporate stocks and bonds . . . . . . . . . . 90,000 Depreciable assets . . . . . . . . . . . . . . . . . . . $200,000 Less: Accumulated depreciation . . . . . . . . . 38,571 161,429 Intangible assets . . . . . . . . . . . . . . . . . . . $40,000 Less: Accumulated amortization . . . . . . . . 20,750 19,250 LIABILITIES AND CAPITAL Accounts payable . . . .. . . . . . . . . . . . . . . . . . . . . . $ 56,489 Notes payable to bank (short-term) . . . . . . . . . . . .. . . 5,116 Mortgage payable to individual (long-term) . . . . . . . 205,000 Total Liabilities 266 605 Partners' capital accounts . . . . . . . . . . . . . . . . . . . . 87,348 Total liabilities and capital . .. . . . . . . . . . . . . . . . . . $353,953 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . $353,953 3