Prepare a schedule in Excel starting with June 15, 20X1 that rolls forward partners Section 704(b) (capital account ) through December 31, 20X2.

Partnership information

General Information

• Tile Doctors Group, LLC is a limited liability company engaged in residential tile installation.
• Craig Howard, Josh Edwards, and Dana Prosky are equal Members.
• The business began operation on June 15, 20X1.
• They use the accrual method of accounting and the calendar year for reporting purposes.
• The partners have agreed to be liable for capital account deficits.
• The current address is: 5917 La Rue, Baton Rouge, LA 70825.
• The LLC uses the lower of cost or market method for valuing inventory.
• They are subject to section 263A; assume section 263A costs are reflected in the same manner for book and tax purposes.
• They did not change their inventory accounting method during the year and there were no write downs of inventory items.
• They do not use the LIFO method.

20X1 Information

• On June 15, 20X1 Prosky, Edwards and Howard formed the partnership as follows:
  • Edwards contributed $50,000 Cash
  • Howard contributed Equipment with a Fair Value of $50,000 and tax basis of $40,000
  • Prosky was granted a un-vested profits only interest for services to be provided, to vest at the end of December 31, 20X1
• For the tax year ended December 31, 20X1:
  • Total partners taxable income was $60,399
  • Partners are allocating profits one third each.
  • Each partner received a $20,000 distribution of cash

20X2 Information

• The 20X2 financial income statement for Tile Doctors Group, LLC reflected net income of $153,320.
• The tax depreciation was $20,815 before considering 179 on new equipment purchases. This should all be treated as cost of goods sold.
• Assume the depreciation creates a tax preference of $5,087 for AMT purposes.
• They purchased and capitalized new tile cutting equipment on the balance sheet. No equipment was disposed of. They will claim a section 179 deduction for the tile cutting equipment.
• All of the artisans are independent contractors and they retain several support Organizations to provide janitorial and other services.
• Ignore the Section 199 Domestic Production Deduction.
• No guaranteed payments were made to members other the Dana Prosky. Instead each member including Prosky withdrew $4,000 per month as a distribution (draw) of operating profits. There were no distributions of noncash property.
• All of the debt is treated as a nonrecourse debt for tax purposes. The partners share equally in all liabilities. All members are considered active for the passive loss rules.
• None of the members sold their interest during 20X2. The operations are restricted to southern LA. They had no foreign operations of foreign bank accounts. They are not publicly traded. No Form 8865 is required to be attached to the return.
• IRS business code is 238300. Fed Id# 11-1111111
• The capital accounts are prepared on a GAAP basis.
• LLC Manager Dana Prosky lives at 1423 N Louisiana Blvd. Baton Rouge, LA 70823
• They file in Ogden, Utah.

A B D E F G H $ Beginning Inventory Costs added Available for sale Ending Inventory Book COGS 36,850 480,506 517,356 (42,940) 474,416 $ 1 The 20X2 financial income statement for Tile Doctors Group, LLC reflected net income of 2 $153,320. The following information was taken from the LLC's financial statements 3 for the current year: 4 5 Receipts: 6 Sales Revenue $ 740,925 7 Interest Income $ 2,700 8 Long Term Capital Gain $ 1,275 9 Short Term Capital loss $ (300) 10 Total Revenues $ 744,600 11 12 Cash Payments related to cost of goods sold: 13 Materials purchases $ 162,250 14 Direct Job costs $ 43,650 15 Additional section 263A costs $ 2,950 16 Contract labor $ 271,656 17 Total Cash payments-work in progress $ 480,506 18 19 Other cash disbursements (net of additional section 263A costs): 20 Rent $ 8,400 21 Telephone and utilities $ 12,180 22 Office employee salaries $ 20,400 23 Contribution to red cross $ 1,500 24 meals and entertainment, subject to 50% disallowance $ 1,200 25 Guaranteed payment, Dana Prosky, managing LLC member $ 30,000 26 Office Expense $ 2,820 27 Legal and accounting fees $ 3,500 28 Payroll taxes $ 2,680 29 Business interest on non recourse debt $ 9,500 30 Repairs $ 1,420 31 Total other cash disbursements $ 93,600 32 33 Noncash Expenses: 34 Depreciation $ 23,264 35 36 37 $ 153,320 28 The beginning and ending balance sheets for the LLC were as follows Cash Inventory (jobs in progress) $ Equipment Accumulated Depreciation Organizational fees Accumulated Amortization Total Assets 20X1 20X2 $ 9,696 $ 7,990 $ 36,850 $ 42,940 $ 46,000 $ 42,000 $ 95,000 $ 112,200 $ (13,576) $ (36,840) $ 3,000 3,000 $ (3,000) $ (3,000) $173,970 $168,290 Nonrecourse debt Partners Capital Total liabilities and capital $ 75,000 $ 60,000 $ 98,970 $ 108,290 $ 173,970 $ 168,290 A B D E F G H $ Beginning Inventory Costs added Available for sale Ending Inventory Book COGS 36,850 480,506 517,356 (42,940) 474,416 $ 1 The 20X2 financial income statement for Tile Doctors Group, LLC reflected net income of 2 $153,320. The following information was taken from the LLC's financial statements 3 for the current year: 4 5 Receipts: 6 Sales Revenue $ 740,925 7 Interest Income $ 2,700 8 Long Term Capital Gain $ 1,275 9 Short Term Capital loss $ (300) 10 Total Revenues $ 744,600 11 12 Cash Payments related to cost of goods sold: 13 Materials purchases $ 162,250 14 Direct Job costs $ 43,650 15 Additional section 263A costs $ 2,950 16 Contract labor $ 271,656 17 Total Cash payments-work in progress $ 480,506 18 19 Other cash disbursements (net of additional section 263A costs): 20 Rent $ 8,400 21 Telephone and utilities $ 12,180 22 Office employee salaries $ 20,400 23 Contribution to red cross $ 1,500 24 meals and entertainment, subject to 50% disallowance $ 1,200 25 Guaranteed payment, Dana Prosky, managing LLC member $ 30,000 26 Office Expense $ 2,820 27 Legal and accounting fees $ 3,500 28 Payroll taxes $ 2,680 29 Business interest on non recourse debt $ 9,500 30 Repairs $ 1,420 31 Total other cash disbursements $ 93,600 32 33 Noncash Expenses: 34 Depreciation $ 23,264 35 36 37 $ 153,320 28 The beginning and ending balance sheets for the LLC were as follows Cash Inventory (jobs in progress) $ Equipment Accumulated Depreciation Organizational fees Accumulated Amortization Total Assets 20X1 20X2 $ 9,696 $ 7,990 $ 36,850 $ 42,940 $ 46,000 $ 42,000 $ 95,000 $ 112,200 $ (13,576) $ (36,840) $ 3,000 3,000 $ (3,000) $ (3,000) $173,970 $168,290 Nonrecourse debt Partners Capital Total liabilities and capital $ 75,000 $ 60,000 $ 98,970 $ 108,290 $ 173,970 $ 168,290