I completed everything except for the last part. I know my answers are right bec
ID: 2401918 • Letter: I
Question
I completed everything except for the last part. I know my answers are right because i double checked but i just dont know how to answer the last section.
Problem 3-1
Schedule C (LO 3.1)
Scott Butterfield is self-employed as a CPA. He uses the cash method of accounting, and his Social Security number is 644-47-7833. His principal business code is 541211. Scott's CPA practice is located at 678 Third Street, Riverside, CA 92860. Scott’s income statement for the year shows the following:
Income Statement
Scott Butterfield, CPA
Income Statement
12/31/2017
Current Period
Prior Period
1/1/2017 to 12/31/2017
1/1/2016 to 12/31/2016
REVENUES
Tax Services
$75,067.00
$72,154.00
Accounting Services
48,860.00
50,256.00
Other Consulting Services
10,115.00
7,690.00
TOTAL REVENUES
134,042.00
130,100.00
COST OF SERVICES
Salaries
30,100.00
29,400.00
Payroll Taxes
2,387.00
2,275.00
Supplies
1,548.00
1,225.00
TOTAL COST OF SERVICES
34,035.00
32,900.00
GROSS PROFIT (LOSS)
100,007.00
97,200.00
OPERATING EXPENSES
Advertising and Promotion
350.00
–
Business Licenses and Permits
250.00
250.00
Charitable Contributions
275.00
250.00
Continuing Education
300.00
–
Dues and Subscriptions
3,500.00
3,500.00
Insurance
875.00
870.00
Meals and Entertainment
5,500.00
5,400.00
Office Expense
150.00
–
Postage and Delivery
50.00
–
Printing and Reproduction
100.00
–
Office Rent
14,000.00
13,800.00
Travel
865.00
750.00
Utilities
2,978.00
2,724.00
TOTAL OPERATING EXPENSES
29,193.00
27,544.00
NET INCOME (LOSS)
$70,814.00
$69,656.00
Scott also mentioned the following:
The expenses for dues and subscriptions were his country club membership dues for the year.
The charitable contributions were made to a political action committee.
Scott does not generate income from the sale of goods and therefore does not record supplies and wages as part of cost of goods sold.
Scott placed a business auto in service on January 1, 2014 and drove it 3,901 miles for business, 3,250 miles for commuting, and 4,500 miles for nonbusiness purposes. His wife has a car for personal use.
Complete Schedule C for Scott showing Scott's net income from self-employment. Assume Scott has evidence to support his deductions. If required, only use the minus sign to indicate a net loss. When required, round amounts to the nearest dollar.
SCHEDULE C
(Form 1040)
Department of the Treasury Internal Revenue Service (99)
Profit or Loss From Business
(Sole Proprietorship)
? Go to www.irs.gov/ScheduleC for instructions and the latest information.
? Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065.
OMB No. 1545-0074
2017
Attachment
Sequence No. 09
Name of proprietor
Scott Butterfield
Social security number (SSN)
644-47-7833
A
Principal business or profession, including product or service (see instructions)
Accounting Services
B
Enter code from instructions
? 541211
C
Business name. If no separate business name, leave blank.
D
Employer ID number (EIN),
(see instr.)
E
Business address (including suite or room no.)
? 678 Third Street
City, town or post office, state, and ZIP code
Riverside, CA 92860
F
Accounting method: (1) ? Cash (2) ? Accrual (3) ? Other (specify) ?
G
Did you "materially participate" in the operation of this business during 2017? If "No," see instructions for limit on losses
? Yes ?No
H
If you started or acquired this business during 2017, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
?
I
Did you make any payments in 2017 that would require you to file Form(s) 1099? (see instructions) . . . . . . .
? Yes ? No
J
If "Yes," did you or will you file required Forms 1099? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
?Yes ? No
Part I
Income
1
Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you
on Form W-2 and the "Statutory employee" box on that form was checked . . . . . . . . . . . . . . . . . . . . ? ?
1
134042
2
Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
3
Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
134042
4
Cost of goods sold (from line 42) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
5
Gross profit. Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 134042
6
Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) . . . .
6
7
Gross income. Add lines 5 and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
7
134042
Part II
Expenses. Enter expenses for business use of your home only on line 30.
8
Advertising . . . . . . . . . . . .
8
350
18
Office expense (see instructions) . . . .
18
200
9
Car and truck expenses (see
19
Pension and profit-sharing plans . . . .
19
instructions). . . . . . . . . . .
9
2087
20
Rent or lease (see instructions): . . . . .
10
Commissions and fees . . . .
10
a
Vehicles, machinery, and equipment . . .
20a
11
Contract labor (see instructions)
11
b
Other business property . . . . . . . . .
20b
1400
12
Depletion . . . . . . . . . . . .
12
21
Repairs and maintenance . . . . . . . . .
21
13
Depreciation and section 179
22
Supplies (not included in Part III) . . .
22
1548
expense deduction (not included in Part III)
23
Taxes and licenses . . . . . . . . . . . .
23
2637
(see instructions)
13
24
Travel, meals, and entertainment:
14
Employee benefit programs
a
Travel. . . . . . . . . . . . . . . . . . . . .
24a
865
(other than on line 19) . . . .
14
b
Deductible meals and
15
Insurance (other than health)
15
875
entertainment (see instructions) . . . .
24b
2750
16
Interest:
25
Utilities . . . . . . . . . . . . . . . . . . . . .
25
2978
a
Mortgage (paid to banks, etc.)
16a
26
Wages (less employment credits) . . . .
26
3900
b
Other . . . . . . . . . . . . . .
16b
27a
Other expenses (from line 48) . . . . . .
27a
400
17
Legal and professional services
17
b
Reserved for future use . . . . . . . .
27b
28
Total expenses before expenses for business use of home. Add lines 8 through 27a . . . . . . . . . . . . . . ?
28
58790
29
Tentative profit or (loss). Subtract line 28 from line 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
75252
30
Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829
unless using the simplified method (see instructions).
Simplified method filers only: enter the total square footage of: (a) your home: _____________
and (b) the part of your home used for business: _____________Use the Simplified Method Worksheet
in the instructions to figure the amount to enter on line 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
31
Net profit or (loss). Subtract line 30 from line 29.
• If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2.
(If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3.
• If a loss, you must go to line 32.
}
31
75252
32
If you have a loss, check the box that describes your investment in this activity (see instructions).
• If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and
on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates and
trusts, enter on Form 1041, line 3.
• If you checked 32b, you must attach Form 6198. Your loss may be limited.
}
32a ? All investment is
at risk.
32b ? Some investment
is not at risk.
For Paperwork Reduction Act Notice, see the separate instructions.
Cat. No. 11334P
Schedule C (Form 1040) 2017
Schedule C (Form 1040) 2017
Part III
Cost of Goods Sold (see instructions)
33
Method(s) used to
value closing inventory: a ? Cost b ? Lower of cost or market c ? Other (attach explanation)
34
Was there any change in determining quantities, costs, or valuations between opening and closing inventory?
If "Yes," attach explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? Yes ? No
35
Inventory at beginning of year. If different from last year's closing inventory, attach explanation . . .
35
36
Purchases less cost of items withdrawn for personal use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
37
Cost of labor. Do not include any amounts paid to yourself . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
38
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
39
Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
40
Add lines 35 through 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
41
Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
42
Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4. . . . . . . .
42
Part IV
Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562.
43
When did you place your vehicle in service for business purposes? (month, day, year) ? 1/1/14
44
Of the total number of miles you drove your vehicle during 2017, enter the number of miles you used your vehicle for:
a Business 3901 b Commuting (see instructions) 3250 c Other 4500
45
Was your vehicle available for personal use during off-duty hours? . . . . . . . . . . . . . . . . . . .
Yes
46
Do you (or your spouse) have another vehicle available for personal use? . . . . . . . . . . . . .
Yes
47a
Do you have evidence to support your deduction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yes
b
If "Yes," is the evidence written? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yes
Part V
Other Expenses. List below business expenses not included on lines 8–26 or line 30.
Continuing Education
Printing
48
Total other expenses. Enter here and on line 27a . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48
400
Schedule C (Form 1040) 2017
I NEED HELP WITH THE FOLLOWING
Complete the reconciliation of book expenses to tax expenses.
Income Statement
Scott Butterfield, CPA
Income Statement
12/31/2017
Current Period
Prior Period
1/1/2017 to 12/31/2017
1/1/2016 to 12/31/2016
REVENUES
Tax Services
$75,067.00
$72,154.00
Accounting Services
48,860.00
50,256.00
Other Consulting Services
10,115.00
7,690.00
TOTAL REVENUES
134,042.00
130,100.00
COST OF SERVICES
Salaries
30,100.00
29,400.00
Payroll Taxes
2,387.00
2,275.00
Supplies
1,548.00
1,225.00
TOTAL COST OF SERVICES
34,035.00
32,900.00
GROSS PROFIT (LOSS)
100,007.00
97,200.00
OPERATING EXPENSES
Advertising and Promotion
350.00
–
Business Licenses and Permits
250.00
250.00
Charitable Contributions
275.00
250.00
Continuing Education
300.00
–
Dues and Subscriptions
3,500.00
3,500.00
Insurance
875.00
870.00
Meals and Entertainment
5,500.00
5,400.00
Office Expense
150.00
–
Postage and Delivery
50.00
–
Printing and Reproduction
100.00
–
Office Rent
14,000.00
13,800.00
Travel
865.00
750.00
Utilities
2,978.00
2,724.00
TOTAL OPERATING EXPENSES
29,193.00
27,544.00
NET INCOME (LOSS)
$70,814.00
$69,656.00
Explanation / Answer
Answer:
i) Book Expenses = TOTAL OPERATING EXPENSES + TOTAL COST OF SERVICES = $29,193 + $34,035 = $63,228
ii) Total Tax expenses = $58,790
iii) Disallowed expenses for tax:
1. The expenses for dues and subscriptions (country club membership dues for the year) = $3,500
2. Charitable contributions made to a political action committee =$275
3. 50% of Meals and Entertainment expenses = 50% * $5,500 = $2,750
As such total disallowed expenses for tax = $3,500 + $275 + $2,750 = $6,525
iv) Additional expense deducted for tax:
Car expenses for 3,901 miles (for business) * 53.5 cents for every business mile = $2,087
Hence
Reconciliation of book expenses to tax expenses.
Book expenses $63,228 Less, Total disallowed expenses for tax - $6,525 Add, Additional expense deducted for tax $2,087 Total Tax expenses $58,790Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.