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 $$50,000$ in exchange for a $50$ percent ownership interest. GTE also bortowed $$200,000$ 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 of a calendar$-$year basis.

GTE received $$450,000$ of sales revenue and reported $$210,000$ of cost of goods sold $($it did not have any ending inventory$).$

GTE paid $$30,000$ compensation to James, $$30,000$ compensation to Paul, and $$40,000$ of compensation to other employees $($assume these amounts include applicable payroll taxes, if any$).$

GTE paid $$15,000$ of rent for a building and equipment, $$20,000$ for advertising, $$14,000$ in interest expense, $$4,000$ for utilities, and $$2,000$ for supplies.

GTE contributed $$5,000$ to charity.

GTE received a $$1,000$ qualified dividend from a great stock investment $($it owned $2$ percent of the corporation distributing the dividend$),$ and it recognized $$1,500$ in short$-$term capital gain when it sold some of the stock.

On December $1,2023,$ GTE distributed $$20,000$ to James and $$20,000$ to Paul.

GTE has qualified property of $$300,000($unadjusted basis$).$

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

a$-2.$ Complete Paul's $1120-$S$,$ Schedule K$-1$ for year $1.$

Note: Use $2023$ tax rules regardless of year on tax form.

Employer Identification Number:

Good to Eat EIN: $58-11111111$

S Corporation EIN: $59-2222222$

Shareholder's identifying number: $111-11-1111$

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

Schedule K $1$