Required information

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 $$270,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$1,080,000$ 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 $$1,550,000$ of sales revenue and reported $$720,000$ of cost of goods sold $($it did not have any ending

inventory$).$

GTE paid $$140,000$ compensation to James, $$140,000$ compensation to Paul, and $$150,000$ of compensation to other

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

GTE paid $$37,000$ of rent for a building and equipment, $$42,000$ for advertising, $$75,600$ in interest expense, $$6,200$

for utilities, and $$4,200$ for supplies.

GTE contributed $$16,000$ to charity.

GTE received a $$5,400$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation

distributing the dividend$),$ and it recognized $$3,700$ in short$-$term capital gain when it sold some of the stock.

On December $1,2023,$ GTE distributed $$42,000$ to James and $$42,000$ to Paul.

GTE has qualified property of $$322,000($unadjusted basis$).$

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

a$-1.$ Assume James and Paul formed GTE as an S corporation.

Complete GTE's Form $1120-$S$,$ page $1$; Form $1120-$S$,$ Schedule K$.$

Note: Visit the IRS website and download Form $1120-$S$,$ Schedule K$.$ Enter the required values in the appropriate fields. Save your