While James 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 $2023,$ and each contributed $$50,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$200,000$ 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 $2023$ activities:

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

GTE received $$450,000$ of sales revenue and reported $$210,000$ of cost of goods sold $($it did not have any ending inventory$).$

GTE paid $$30,000$ compensation to James, $$30,000$ compensation to Paul, and $$40,000$ of compensation to other employees $($assume these amounts include applicable payroll taxes, if any$).$

GTE paid $$15,000$ of rent for a building and equipment, $$20,000$ for advertising, $$14,000$ in interest expense, $$4,000$ for utilities, and $$2,000$ for supplies.

GTE contributed $$5,000$ to charity.

GTE received a $$1,000$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation distributing the dividend$),$ and it recognized $$1,500$ in short$-$term capital gain when it sold some of the stock.

On December $1,2023,$ GTE distributed $$20,000$ to James and $$20,000$ to Paul.

GTE has qualified property of $$300,000($unadjusted basis$).$

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

c$-2.$ Assume James and Paul formed GTE as an S corporation. Complete gtes form $1120-$s$,$ page $1$; form $1120-$s$,$ schedule k$.$

Form $1120-$S page $1.$

Form $1120-$S

Department of the Treasury

U$.$S$.$ Income Tax Return for an S Corporation

Do not file this form unless the corporation has filed or is attaching Form $2553$ to elect to be an $S$ corporation.

OMB No$.1545-0123$

$2022$

$2022$

For calendar year $2022$ or tax year beginning

$\backslash$table$[[$A S election effective date$],[$B Business activity code number$],[($see instructions$)],[$C Check if Sch$.M-3$ attached$]]$

$O$ Is the corporation electing to be an $S$ corporation beginning with this tax year?

H Check if:

$(1)$ Final return

$(2)$ Name

change

$(3)$ Address

Change

I Enter the number of shareholders who were shareholders during any part of the tax year

$J$ Check if corporation:

$(1)$ Aggregated activities for section $465$ at$-$nisk purposes

$(2)$ Grouped activites for section $469$ passive activity purposes

Caution: Include only trade or business income and expenses on lines $1$a through $21.$ See the instructions for more information.

Form $1120-$S

Department of the Treasury

Internal Revenue Service

For calendar year $2022$ or tax year beginning

U$.$S$.$ Income Tax Return for an S Corporation

Do not file this form unless the corporation has filed or Is attaching Form $2553$ to elect to be an $S$ corporation.

Go to unw.irs gov$/$Form$1120$S for instructions and the latest information.

OMB No$.1545-0123$

$2022$

$2022$

$\mathrm{.}20$

$,2022,$ ending

$\backslash$table$[[$Name $($Enter corporation name exactly as shown above.$),$D Employer identification number$],[,],[\backslash$table$[[$Number$,$ street, and from or sulte no$.$ If a P$.$O$.$ box, see$],[$instructions$.]],$E Date incorporated$],[\backslash$table$[[$City or town, state or province, country, and ZIP or foreign postal$],[$code$]],$F Total assots $($see instructions$)]]$

$\backslash$table$[[$Name $($Enter corpocation name exactly as shown above.$)],[\backslash$table$[[$Number$,$ street, and riom or suite no$.$ If a P$.$O$.$ box, see$],[$instructions$.]]],[\backslash$table$[[$City or town, state or province, country, and ZIP or foreign postal$],[$code$]]]]$

Yos

No

$(4)$ Amended retum

change

Change It "Yes," altach aiready filed

$(5)$ S election termination or

$H$ Check if:

$(1)$ Final retum

$(2)$ Name

$(3)$ Address revocation

I Enter the number of shareholders who were shareholders during any part of the tax year

J Check if corporation:

$(1)$ Aggregated activities for section $465$ al$-$risk purposes

$(2)$ Grouped activities for section $469$ passive activity purposes

Caution: Include only trade or business income and expenses on lines $1$a through $21.$ See the instructions for more information.