Tax Return #4 Partnership Problem (Tax Return #4) Brookelynne Dodge and Tex Ranger are equal partners in the MLB general partnership. The partnership began on 8/19/2003. The partners have equal profit and loss sharing percentages, but their share of capital is different due to differences in withdrawals over the years. The partnership's address is 333 W. 35th Street, Chicago, IL 60600. The partnership's employer ID number is 12-1234567. The partnership is engaged in the retail sale of sporting goods. Business Code 459110. MLB is a calendar year, accrual basis taxpayer. All required Forms 1099 were filed for 2022. (Page 3, Sch. B, Lines 16a and b.) Brookelynne's address is 1060 W. Addison Street, Chicago, IL 60601. Her SSN is 110-12-3456. Brookelynne is the tax representative partner. (Entered on the bottom of page 3) Tex's address is 1501 South Pipeline Road, Euless, TX 76040. His SSN is 420-98-7654 The partners are not related to each other. Brookelynne's beginning capital account was 63,700. Tex's beginning capital account was 21,500. The company uses the Lower of Cost or Market and FIFO methods for inventory. There been no write-downs of goods. The company uses the periodic inventory method. Actual ventory on hand, based on a count on 12/31/22 is $61,000. (This requires a journal entry) Note that, because the partnership uses the periodic inventory method, you must convert from purchases to COGS with the same journal entry you use to adjust ending inventory. Tax depreciation is 125 % of book. Book and tax amortization are the same. The difference between book and tax depreciation must be entered on both Schedules M-1 and M-2. This is because M-2 line 3 is taxable income not book income. The partnership uses the direct charge-off method to account for bad debts on its books. Trial Balance Following is the partnership's trial balance as of the close of business on December 31, 2022: Cash Notes and accounts receivable Dr. Cr 78,200 23,500 Investments-U.S. Government obligations 5,000 Investments-State Government obligations Corporate Stocks and Bonds Inventory Land Truck Office furniture Machinery and equipment Patent Copier 50,000 90,000 50,000 30,000 20,000 10,000 170,000 40,000 2,500 Accumulated depreciation 138,000 Accumulated amortization 22,800 Accounts payable 36,400 Notes payable to bank (short-term) 21,900 Mortgage payable to individual (long-term) 59,200 Dodge-Capital account 1/1/22 63,700 Dodge-Withdrawals 12,000 Ranger-Capital account 1/1/22 21,500 Sales Sales allowances Purchases Office and sales salaries Guaranteed payment-Dodge Guaranteed payment Ranger 6,000 16,800 439,800 5,400 96,300 26,000 Dooge-wrawies Ranger-Capital account 1/1/22 Sales Sales allowances Purchases Office and sales salaries Guaranteed payment-Dodge Guaranteed payment-Ranger Rent Interest on business loans 21,500 439.800 5,400 96,300 26,000 6.000 16,800 4,100 9,700 Unincorporated business tax 200 Business license and inspection fees 250 Social security and employment taxes 10,250 Amortization (on patent, report on Sch. K, Line 13d) 2,000 Bad debts 2,050 Repairs 2.800 Depreciation 49,700 Insurance 2,900 Utilities Postage 2,800 600 Office expense 100 Miscellaneous 100 Business meals 5,500 Contributions to XYZ Charity 250 Patent royalties received (report on Sch. K. Line 7) 12,900 Dividends (All are qualified) 3,000 Interest on U. S. Obligation Interest on Municipal Obligations 800 5,000 BALANCE SHEET The firm's balance sheet, as of January 1, 2022, was as follows: ASSETS Cash Trade notes and accounts receivable Inventories Investments in government obligation Investments in corporate stocks Investments in municipal bonds Depreciable assets Less: Accumulated depreciation Intangible assets Less: Accumulated amortization Total assets LIABILITIES AND CAPITAL Accounts payable Notes payable to bank (short-term) Mortgage payable to individual (long-term) Partners' capital accounts Total liabilities and capital Check Figures: Total Assets 12/31 $419,400 Partners' capital accounts 12/31: $301,900 Ending capital Dodge: 166,049 (you could have a dollar or two of rounding errors) Net income per books (M-1, line 1): 228,700 Ordinary business income (loss): $196.825 825,000 825,000 7,300 21,000 50,000 5.000 40,000 50,000 200,000 (88,300) 40,000 (20.800 304,200 56,500 7,500 155,000 85,200 304,200