On January 1, 20X9, Mr

Essay

On January 1, 20X9, Mr. Blue and Mr. Grey each contributed $100,000 to form the B&G general partnership. Their partnership agreement states that they will each receive a 50% profits and loss interest. The partnership agreement also provides that Mr. Blue will receive an annual $36,000 guaranteed payment. B&G began business on January 1, 20X9. For its first taxable year, its accounting records contained the following information.
The $3,000 of interest was paid on a $60,000 loan made to B&G by Key Bank on June 30, 20X9. B&G repaid $10,000 of the loan on December 15, 20X9. Neither of the partners received a cash distribution from B&G in 20X9.
Complete the following table related to Mr. Blue's interest in B&G partnership:
$$\begin{array} { | l | r | } \hline \text { Gross receipts from sales } & \$ 150,000 \\\hline \text { Cost of sales } & ( \$ 220,000 ) \\\hline \text { Gross profit } & ( \$ 70,000 ) \\\hline \text { Guaranteed payments to Mr. Blue } & ( \$ 36,000 ) \\\hline \text { Interest paid on business debt } & ( \$ 3,000 ) \\\hline \text { Dividend income } & \$ 500 \\\hline \text { Tax exempt interest } & \$ 1,500 \\\hline \text { Operating expenses } & ( \$ 138,000 ) \\\hline \text { Depreciation expense } & ( \$ 9,000 ) \\\hline \text { Sec. 1231 Gains } & \$ 8,000 \\\hline\end{array}$$