On Jan.1 of the current year, Mr. Radon and Mr. Helix established operations of their partnership Smackey Technologies, a manufacturer of electronic components. Both partners actively participate equally. Smackey’s income statement for the current calendat year, is presented below.
Sales $1,000,000
Cost of sales (410,000)
Gross profit 590,000
Operating expenses
Salaries and wages (excluding partners) 165000
Guaranteed payments to partners 100000
Depreciation of machinery and equipment 145000
Partners' health insurance premiums 10000
Contributions to pension plans (excluding partners) 12000
Contributions to Keogh pension plan 6000
Charitable contributions 22000
operating ordinary income 130000
other income (loss) :
interest 2500
rental income net (1800)
total 700
total net income 130,700
Other information:
Radon and Helix share profits and losses equally
Guaranteed payments to partners are for services rendered and are determined without regard to partnership income.
In addition to the guaranteed payments, Radon and Helix each drew $35,000.
These drawings were unrelated to the guaranteed payments Guaranteed payments and partners' health insurance premiums are divided equally between Radon and Helix.
The charitable contribution was made in cash to a qualified charitable organization
Question 1: Enter the appropriate values in the 1065 tax form
Question 2: Using the data provided in the tab titled “Information,” enter the approriate values in the schedule K and K-1 below.
Form 1065
1.Gross receipts or sales | $1,000,000 |
2.Interest Income | $0 |
3.Cost of goods sold | $410,000 |
4.Gross Proft | $590,000 |
5.Salaries and wages(excluding partners) | $165,000 |
6.Gauranteed payments | $110,000 |
7.Depriciation |
$145,000 |
8.Retirement Plans | $12,000 |
9.Charitable Contributions | $0 |
10.Ordinary Business Income/Loss | $158,000 |
form k and k-1
1.Ordinary Business Income/Loss | $84,000=($158,000+$10,000(health insuance premium taken separately)*50%) |
2.Rental real estate income ?loss? | ($900? = ?1,800?* 50% |
3.Guaranteed payments | $50,000 = (100,000*50%) |
4.Interest income | $1,250 = 2,500*50% |
5.Charitable contributions | $11,000 = 22,000*50% |
6.Retirement plans | $0 |
7.Keogh contribution | $3,000 = 6,000*50% |
8.Partner’s medical insurance | $5,000 = 10,000*50% |
9.Depreciation | $0 |
10.Distribution of cash | $35,000 = 70,000*50% |
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