REQUIRED FORMS AND RELATED INSRUCTIONS: Using the information provided, complete Aspen Ridge limited partnership's 2019 Form 1065 including Mark and Freds K-1s. (Make sure that the sum of each line on the K-1s equals the corresponding line on schedule K.) On Form 1065, you will need to do Page 1, Schedule K, the income analysis on the top of page 5, schedule M-1, schedule M-2 and both k-1s. (Make sure the last line on schedule M-1 agrees to your income analysis.) You do not need to complete schedule B or schedule L on form 1065. When filling out K-1s, make sure you use the appropriate code from the back to describe unspecified amounts. Form 4562 for depreciation is also required. Include any tax depreciation or Section 179 expense on the appropriate line of page 1 of Form 1065 or Schedule K. If any information is missing, use reasonable assumptions to fill in any gaps. You do not need to fill out schedule D or any other forms related to the sale of stock. Simply put the gain on the appropriate line on schedule K and K-1s. The forms, schedules, and instructions can be found at the IRS Web site (www.irs.gov). The instructions can be helpful in completing the forms. You are allowed to work in groups of up to 3 people. You are welcome to come discuss the case with me and ask for guidance. REQUIRED MEMO: Aspen is an accrual basis taxpayer. However, it is considering switching to the cash method. Please write a short memo to the partners explaining how to change accounting methods. You do not need to calculate the cumulative effect of the change, but you do need to tell managers how any additional income or expense would be treated for tax purposes including the related code section. You should also mention which form needs to be filed. DUE DATE: March 18th, 2020 at the beginning of Class. A hardcopy is required. A one week extension will be granted if the appropriate form is filed by the due date. FACTS: The Aspen Ridge limited partnership was formed on April 1, 2009, by Mark Sullivan, its general partner, and Fred Tesla, the limited partner, when they each contributed an equal amount of cash to start the new enterprise. Aspen Ridge is an outdoor equipment retailer selling camping, fishing, skiing, and other outdoor gear to the general public. Mark has a 33.33% profits and capital interest and Fred has a 66.67% profits and capital interest. Their profits and capital interests have remained unchanged since the partnership was formed. Mark is actively involved in managing the business while Fred, the limited partner, is simply an investor. Aspen Ridge is located at 1065 North 365 South, Ogden, UT, 84401. The employer identification number for Aspen Ridge is 85-8976654. Aspen Ridge uses the accrual method of accounting and has a calendar year end. Mark's address is 543 Wander Lane, Holliday, UT 84503. His Social Security Number is 845-03-1111 Freds address is 245 Hickory Lane, Ogden, UT 84401. His Social Security Number is 844-01-2222 The following is Aspen Ridge's 2019 income statement for books: Aspen Ridge Income Statement For year ending December 31, 2019 Sales 3,400,000 Sales Returns and Allowances (80,000) Cost of Goods Sold (2,650,000) Gross Profit from Operations 670,000 Other Income: Interest from Illinois State Bonds 3,000 Interest from IBM Corporate Bonds 2,000 Royalties on Patents 58,000 Dividend Income (Qualified) 8,000 Long-term Capital Gain from Stock 25,000 Gross Income 736,000 Expenses: Employee wages 275,000 Bad Debts 24,000 Miscellaneous Expense 8,000 Rent on retail building 18,500 Depreciation 12,000 Advertising 16,000 Guaranteed payments to Mark Sullivan 50,000 Utilities 8,500 Accounting and legal services 7,000 Meals 4,000 Entertainment 1,000 Fines and Penalties 3,000 Charitable Contributions 9,000 Total Expenses (436,000) Net Income for Books $ 330,000 Aspen Ridge Balance Sheet December 31, 2019 Cash 300,000 Accounts Receivable 135,000 Allowance for Doubtful Accts (10,000) Inventory 1,300,000 Fixed Assets 680,000 Accumulated Depreciation (112,000) Total Assets 2,293,000 Accounts Payable Long-term Debt Partners Capital Account Total Liabilities & Capital 221,340 600,000 1,471,660 2,293,000 Notes: 1. Partnership liabilities consist of accounts payable, and Mark, as general partner, is legally responsible for paying these liabilities if the partnership does not. 2. In 2019, Aspen Ridge sold stock investments for a $25,000 capital gain. (The book and tax gains are equal.) 3. For tax purposes, Aspen Ridge has $30,000 of new additions that will be completely deducted using Section 179. Aspen has no other tax depreciation. 4. On November 30th, Aspen Ridge distributed $150,000 ($100,000 to Fred and $50,000 to Mark) to the partners. 5. Aspen Ridge maintains its books using generally accepted accounting principles. You can assume that all other expenses or accruals for GAAP purposes were also deductible for Tax purposes unless otherwise specified. 6. Partners Capital Account balance at the beginning of the year was 1,291,660. 7. Aspen Ridge accrued $24,000 of bad debt expense in 2019 and wrote off $19,000. Allowance for Doubtful Accts Beginning Balance $ 5,000 Bad Debt Accrued 24,000 Write-Offs (19,000) Ending Balance $10,000.