Question

Question 74 of 75. Eileen and Sara began the Bean Buzz coffee shop in 2016 as equal partners. In 2018, their financial records included the following: • $113,582 in gross receipts. • $30,467 in purchases. • $3,042 in beginning inventory. $2,788 in inventory at the end of 2018. $21,594 in salaries for the baristas. • $6,429 in general supplies. • $846 for business insurance. • $3,599 for a new office desk purchased on July 1, 2018 for which they did not elect bonus depreciation or a Section 179 deduction. Eileen and Sara did not take any distributions for 2018. However, they each have a guaranteed payment as a result of the capital they contributed. Eileen receives $10,000 and Sara receives $12,000. What is the cost of goods sold for the Bean Buzz for 2018 and what is the amount for their ordinary income or loss? Form 1125-A, line 8 - $30,721 Form 1065, line 22 - $31,478 O Form 1125-A, line 8- $52,315 Form 1065, line 22 - $31,478 O Form 1125-A, line 8 - $30,721 Form 1065, line 22 - $53,478 O Form 1125-A, line 8 - $52,315 Form 1065, line 22 - $53,478

Answer 1

Cost of goods sold - Form 1125-A, line 8

Particulars	Amount (in $)
1 Inventory at beginning of year	3,042
2 Purchases	30,467
3 Cost of labor	0
4 Additional section 263A costs	0
5 Other costs	0
6 Total. Add lines 1 through 5	33,509
7 Inventory at end of year	2,788
8 Cost of goods sold. Subtract line 7 from line 6.	30,721

Ordinary Income or loss - Form 1065, Line 22

Particulars	Amount (in $)
1 Gross receipts or sales	113,582
2 Cost of goods sold (attach Form 1125-A)	30,271
3 Gross profit. Subtract line 2 from line 1	82,861
8 Total income (loss)	82,861
9 Salaries and wages (other than to partners)	21,594
10 Guaranteed payments to partners	22,000
16 Depreciation (Office desk is depreciated for 7 years)	514
20 Other deductions (Supplies + Insurance)	7,275
21 Total deductions. Add the amounts shown in the far right column for lines 9 through 20	51,383
22 Ordinary business income (loss). Subtract line 21 from line 8	31,478

Cost of goods sold for the Bean Buzz for 2018 = $30,721

Ordinary Income = $31,478

The answer is Form 1125-A, line 8 - $30,721; Form 1065, line 22 - $31,478