help preparing (2) k-1 and General partnership form 1065 Form 1065 and (2) k-1

Other Information: The company paid Dr. Bailey a $100,000 guaranteed payment for her management services. The company made a $40,000 cash contribution to Fort Sanders Hospital System on December 1 of the current year. During the current year, the company made a $360,000 cash distribution to Dr. Bailey and a $840,000 cash distribution to Dr. Firth. The municipal bonds, acquired in 2015, are general revenue bonds, not private-activity bonds. Assume that no expenses of the company are allocable to the tax-exempt inter- est generated from the municipal bonds. Assume qualified production activities income (QPAI) equals $1.6 million. Employer's W-2 wages allocable to U.S. production activities equal $700,000. The company, being an eligible small pass-through partnership, uses the small business simplification over- all method for reporting these activities (see discussion for Line 13d of Schedule K and Line 13 of Schedule K-1 in the Form 1065 instructions). Use book numbers for Schedule L, Schedule M-2, and Line 1 of Schedule M-1. Also use book numbers for Item L of Schedule K-1, and check the box for Sec. 704(b) book. The partners share liabilities, which are recourse, in the same proportion as their own- ership percentages. Required: Prepare the 2016 partnership tax return (Form 1065), including the follow- ing additional schedules and forms: Schedule D, Form 4562, and Schedule K-1. Optional: Prepare a schedule for each partner's basis in his or her partnership interest. At January 1, 2016, Bailey's basis was $873,180, and Firths was $1,845,420. V TABLE C:9-3 Healthwise Medical Supplies CompanyBook Balance Sheet Information January 1, 2016 Debit Credit December 31, 2016 Debit Credit Account $ 233,500 540,000 1,000,000 40,000 240,000 1,000,000 $ 143,450 600,000 1,200,000 40,000 -O- 1,400,000 Cash Accounts receivable Inventory Investment in municipal bonds Investment in corporate stock Equipment Accumulated depreciation- Equipment Accounts payable Notes payable (short-term) Accrued payroll expenses Capital account balances: Dr. Leisa H. Bailey (30%) Dr. Thomas J. Firth (70%) $ 142,900 100,000 750,000 3,500 $ 787,800 130,000 150,000 5,250 617,130 1,439,970 $3,053,500 693,120 1,617,280 $3,383,450 Totals $3,053,500 $3,383,450 TABLE C:9-4 Healthwise Medical Supplies Company-Book Income Statement 2016 $5,000,000 (250,000) $4,750,000 $1,000,000 2,000,000 (1,200,000) (1,800,000) $2,950,000 Sales Returns and allowances Net sales Beginning inventory Purchases Ending inventory Cost of goods sold Gross profit Expenses: Depreciation (including Sec. 179) Repairs General insurance Guaranteed payment (to Dr. Bailey) Other salaries Travel Utilities Rent expense Advertising expense Professional fees Employment taxes Business interest expense Investment expenses Investment interest expense Meals and entertainment Charitable contributions (cash) Total expenses Other income: Interest on municipal bonds Dividend income Gain on stock sale: Selling price Book value Book gain Net income per books $ 644,900 32,500 35,000 100,000 700,000 20,000 60,000 150,000 30,000 50,000 70,000 36,000 3,600 4,500 15,000 40,000 (1,991,500) 1,600 13,200 $720,000 (240,000) 480,000 $1,453,300 Fixed Assets and Depreciation (Form 4562): The company acquired the equipment on January 2, 2015, and placed it in service on that date. The equipment, which originally cost $1 million, is MACRS seven-year property. The company did not elect Sec. 179 expensing in the acquisition year and elected out of bonus depreciation. The company claimed the following depreciation on this property: Year Book and Regular Tax Depreciation $142,900 244,900 2015 AMT Depreciation $107,100 191,300 2016 On March 1, 2016, the company acquired and placed in service additional equipment costing $400,000. The company made the Sec. 179 expensing election for the entire cost of this new equipment. No depreciation or expensing is reported on Schedule A. Other Information: The company paid Dr. Bailey a $100,000 guaranteed payment for her management services. The company made a $40,000 cash contribution to Fort Sanders Hospital System on December 1 of the current year. During the current year, the company made a $360,000 cash distribution to Dr. Bailey and a $840,000 cash distribution to Dr. Firth. The municipal bonds, acquired in 2015, are general revenue bonds, not private-activity bonds. Assume that no expenses of the company are allocable to the tax-exempt inter- est generated from the municipal bonds. Assume qualified production activities income (QPAI) equals $1.6 million. Employer's W-2 wages allocable to U.S. production activities equal $700,000. The company, being an eligible small pass-through partnership, uses the small business simplification over- all method for reporting these activities (see discussion for Line 13d of Schedule K and Line 13 of Schedule K-1 in the Form 1065 instructions). Use book numbers for Schedule L, Schedule M-2, and Line 1 of Schedule M-1. Also use book numbers for Item L of Schedule K-1, and check the box for Sec. 704(b) book. The partners share liabilities, which are recourse, in the same proportion as their own- ership percentages. Required: Prepare the 2016 partnership tax return (Form 1065), including the follow- ing additional schedules and forms: Schedule D, Form 4562, and Schedule K-1. Optional: Prepare a schedule for each partner's basis in his or her partnership interest. At January 1, 2016, Bailey's basis was $873,180, and Firths was $1,845,420. V TABLE C:9-3 Healthwise Medical Supplies CompanyBook Balance Sheet Information January 1, 2016 Debit Credit December 31, 2016 Debit Credit Account $ 233,500 540,000 1,000,000 40,000 240,000 1,000,000 $ 143,450 600,000 1,200,000 40,000 -O- 1,400,000 Cash Accounts receivable Inventory Investment in municipal bonds Investment in corporate stock Equipment Accumulated depreciation- Equipment Accounts payable Notes payable (short-term) Accrued payroll expenses Capital account balances: Dr. Leisa H. Bailey (30%) Dr. Thomas J. Firth (70%) $ 142,900 100,000 750,000 3,500 $ 787,800 130,000 150,000 5,250 617,130 1,439,970 $3,053,500 693,120 1,617,280 $3,383,450 Totals $3,053,500 $3,383,450 TABLE C:9-4 Healthwise Medical Supplies Company-Book Income Statement 2016 $5,000,000 (250,000) $4,750,000 $1,000,000 2,000,000 (1,200,000) (1,800,000) $2,950,000 Sales Returns and allowances Net sales Beginning inventory Purchases Ending inventory Cost of goods sold Gross profit Expenses: Depreciation (including Sec. 179) Repairs General insurance Guaranteed payment (to Dr. Bailey) Other salaries Travel Utilities Rent expense Advertising expense Professional fees Employment taxes Business interest expense Investment expenses Investment interest expense Meals and entertainment Charitable contributions (cash) Total expenses Other income: Interest on municipal bonds Dividend income Gain on stock sale: Selling price Book value Book gain Net income per books $ 644,900 32,500 35,000 100,000 700,000 20,000 60,000 150,000 30,000 50,000 70,000 36,000 3,600 4,500 15,000 40,000 (1,991,500) 1,600 13,200 $720,000 (240,000) 480,000 $1,453,300 Fixed Assets and Depreciation (Form 4562): The company acquired the equipment on January 2, 2015, and placed it in service on that date. The equipment, which originally cost $1 million, is MACRS seven-year property. The company did not elect Sec. 179 expensing in the acquisition year and elected out of bonus depreciation. The company claimed the following depreciation on this property: Year Book and Regular Tax Depreciation $142,900 244,900 2015 AMT Depreciation $107,100 191,300 2016 On March 1, 2016, the company acquired and placed in service additional equipment costing $400,000. The company made the Sec. 179 expensing election for the entire cost of this new equipment. No depreciation or expensing is reported on Schedule A