Required information

While JaTnes Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing

careers in professional cake decorating. Their company, Good to Eat $($GTE$),$ specializes in custom$-$sculpted cakes for

weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of $2022,$ and each

contributed $$180,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$720,000$ from a local bank.

Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The

following information pertains to GTE's $2022$ activities:

GTE uses the cash method of accounting $($for both book and tax purposes$)$ and reports income on a calendar$-$year

basis.

GTE received $$1,100,000$ of sales revenue and reported $$510,000$ of cost of goods sold $($it did not have any ending

inventory$).$

GTE paid $$95,000$ compensation to James, $$95,000$ compensation to Paul, and $$105,000$ of compensation to other

employees $($assume these amounts include applicable payroll taxes, if any$).$

GTE paid $$28,000$ of rent for a building and equipment, $$33,000$ for advertising, $$50,400$ in interest expense, $$5,300$

for utilities, and $$3,300$ for supplies.

GTE contributed $$11,500$ to charity.

GTE received a $$3,600$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation

distributing the dividend$),$ and it recognized $$2,800$ in short$-$term capital gain when it sold some of the stock.

On December $1,2022,$ GTE distributed $$33,000$ to James and $$33,000$ to Paul.

GTE has qualified property of $$313,000($unadjusted basis$).$

Note: Leave no answers blank. Enter zero if applicable. Enter N$/$A if not applicable.

b$-2.$ Assume James and Paul formed GTE as an LLC$.$

Complete Paul's Form $1065,$ Schedule K$-1.$

Use $2022$ tax rules regardless of year on tax form.