Requlred Information Requlred 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 $2022,$ and each

contributed $$180,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$720,000$ 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 $2022$ activities:

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

basis.

GTE received $$1,100,000$ of sales revenue and reported $$510,000$ of cost of goods sold $($it did not have any ending

inventory$).$

GTE paid $$95,000$ compensation to James, $$95,000$ compensation to Paul, and $$105,000$ of compensation to other

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

GTE paid $$28,000$ of rent for a building and equipment, $$33,000$ for advertising. $$50,400$ in interest expense, $$5,300$

for utilities, and $$3,300$ for supplies.

GTE contributed $$11,500$ to charity.

GTE received a $$3,600$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation

distributing the dividend$),$ and it recognized $$2,800$ in short$-$term capital gain when it sold some of the stock.

On December $1,2022,$ GTE distributed $$33,000$ to James and $$33,000$ to Paul.

GTE has qualified property of $$313,000($unadjusted basis$).$

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

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

Eomplete GTE's Form $1120,$ page $1.$

Note: Use $2022$ tax rules regardless of year on tax form.

Employer identification number: $58-1111111$

Prepare GTE's Form $1120,$ page $1$

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 $2022,$ and each

contributed $$180,000$ in exchange for a $50$ percent ownership interest. GTE also borrowed $$720,000$ 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 $2022$ activities:

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

basis.

GTE received $$1,100,000$ of sales revenue and reported $$510,000$ of cost of goods sold $($it did not have any ending

inventory$).$

GTE paid $$95,000$ compensation to James, $$95,000$ compensation to Paul, and $$105,000$ of compensation to other

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

GTE paid $$28,000$ of rent for a building and equipment, $$33,000$ for advertising. $$50,400$ in interest expense, $$5,300$

for utilities, and $$3,300$ for supplies.

GTE contributed $$11,500$ to charity.

GTE received a $$3,600$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation

distributing the dividend$),$ and it recognized $$2,800$ in short$-$term capital gain when it sold some of the stock.

On December $1,2022,$ GTE distributed $$33,000$ to James and $$33,000$ to Paul.

GTE has qualified property of $$313,000($unadjusted basis$).$

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

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

Eomplete GTE's Form $1120,$ page $1.$

Note: Use $2022$ tax rules regardless of year on tax form.

Employer identification number: $58-1111111$