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 $$140,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$560,000$ 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 $$900,000$ of sales revenue and reported $$420,000$ of cost of goods sold $($it did not have any ending inventory$).$

GTE paid $$75,000$ compensation to James, $$75,000$ compensation to Paul, and $$85,000$ of compensation to other employees $($assume these amounts include applicable payroll taxes, if any$).$

GTE paid $$24,000$ of rent for a building and equipment, $$29,000$ for advertising, $$39,200$ in interest expense, $$4,900$ for utilities, and $$2,900$ for supplies.

GTE contributed $$9,500$ to charity.

GTE received a $$2,800$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation distributing the dividend$),$ and it recognized $$2,400$ in short$-$term capital gain when it sold some of the stock.

On December $1,2023,$ GTE distributed $$29,000$ to James and $$29,000$ to Paul.

GTE has qualified property of $$309,000($unadjusted basis$).$

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

a$-2.$ Assume James and Paul formed GTE as an S corporation.

Complete Paul's Form $1120-$S$,$ Schedule K$-1.$

Note: Visit the IRS website and download Form $1120-$S$,$ Schedule K$-1.$ Enter the required values in the appropriate fields. Save your completed Tax Form to your computer and then upload it here by clicking "Browse." Next, click "Save."Requlred Information

While James Cralg and his former classmate Paul Dolittle both studled accounting at school, they ended up pursuing

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

weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of $2023,$ and each

contributed $$140,000$ In exchange for a $50$ percent ownership Interest. GTE also borrowed $$560,000$ 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 $2023$ activitles:

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

basls.

GTE recelved $$900,000$ of sales revenue and reported $$420,000$ of cost of goods sold $($It did not have any ending

Inventory$).$

GTE pald $$75,000$ compensation to James, $$75,000$ compensation to Paul, and $$85,000$ of compensation to other

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

GTE pald $$24,000$ of rent for a bullding and equipment, $$29,000$ for advertising, $$39,200$ in interest expense, $$4,900$

for utilities, and $$2,900$ for supplies.

GTE contributed $$9,500$ to charity.

GTE recelved a $$2,800$ qualfied dividend from a great stock Investment $($It owned $2$ percent of the corporation

distributing the dividend$),$ and It recognized $$2,400$ in short$-$term capital gain when it sold some of the stock.

On December $1,2023,$ GTE distributed $$29,000$ to James and $$29,000$ to Paul.

GTE has quallfied property of $$309,000($unadjusted basis$).$

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

a$\mathrm{.}2.$ Assume James and Paul formed GTE as an S corporation.

Complete Paul's Form $1120-$S$,$ Schedule K$-1.$

Next, cllck "Save."