Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

John Stantus, single, is the sole owner of Status Accounting Services, Co. He started the company, which is organized as a sole proprietorship, on February

John Stantus, single, is the sole owner of Status Accounting Services, Co. He started the company, which is organized as a sole proprietorship, on February 10 of the current year. For this year, Status Accounting Services reported the following amounts of income and expenses:

Fee revenues $540,000
Expenses: Employee wages (125,000)
Payroll taxes (9,563)
Advertising (3,600)
Insurance (2,400)
Utilities (7,200)
Rent (10,000)
Supplies (5,000)
Selling expenses (35,000)

John purchased a car on February 1 of the current year for $24,000. He uses the car for both business and personal purposes. Mileage logs indicate that John put 40,000 miles on the car this year. Of that total, 28,000 miles were business-related and the remaining 12,000 were related to personal travel. John wants to deduct the maximum amount allowable for the business use of his car.

John also purchased office equipment, computers and other five-year property for use in the business. He purchased $285,000 worth of such depreciable assets in March. He wants to deduct the maximum amount allowable under Code Sec. 179 and depreciate the remaining cost (if any) under the MACRS system. Assume that the Sec. 179 deductions and bonus depreciation are not extended past 2014.
Selling expenses include $6,000 spent for meals and entertainment incurred on John’s sales calls during the year.
Selling expenses also include $12,000 in illegal payments to city officials paid to secure a lucrative contract with the city. John was uncomfortable making this payment but reasoned that the contract was important to get his business off to a good start.
Selling expenses also include gasoline, parking fees, and other documented auto expenses totaling $2,500 attributable to John’s sales calls.

Assume that John reports the revenue and expenses of Status Accounting Services on Schedule C, that he uses the cash method of accounting, and that he has no other taxable income, deductions, or credits other than the items listed above. As noted above, he is single, with no dependents. He lives at 105 1st Street in Jackson, Mississippi (zip code = 39201). His social security number is 555-33-4444. His business address is 501 19th Street, Jackson, MS 39201. Skipping Schedule SE (on which you would ordinarily calculate the self-employment tax), prepare John’s 2014 Individual Income Tax Return. (Note: you may have to use 2014 forms.)

Step by Step Solution

3.46 Rating (143 Votes )

There are 3 Steps involved in it

Step: 1

Employees wages Payrou Tars Aiduertioing 125000 9563 3600 Insur... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Management Accounting

Authors: Pauline Weetman

7th edition

1292086599, 978-1292086590

More Books

Students also viewed these Accounting questions

Question

Why are there magic numbers in the nuclear shell model?

Answered: 1 week ago

Question

What is the Global Reporting Initiative?

Answered: 1 week ago

Question

What is the effect on cash flow of an increase in inventory levels?

Answered: 1 week ago

Question

Why are there problems with revenue recognition?

Answered: 1 week ago