Julia Jimenez began a new business on January $1,2019,$ to which she has devoted most of her time and which has provided her livelihood for the last few years. Hav A Java is a drive$-$up coffee stand in the town where she lives. The location is easily accessible for both drive$-$ups, as well as walk ups from the nearby high school and middle school. During $2022,$ she had nine employees plus herself, working as baristas, to cover the business hours from $5$am $7$pm$,$ seven days per week.

She takes payments with cash, plastic, and digital payments. She does her own payroll and payroll reporting using FastBooks and handles her own bookkeeping records using the same software, and for state sales tax reporting. She provides annual reports and other records to her tax preparer.

Additional Information

Julia is single with no dependents. Hav A Java sells espressos and other hot and cold drinks, along with breakfast items, sandwiches, and desserts. Most of the special food items are purchased from local small businesses, but they sell to her at wholesale prices. She works in the shop herself five days per week and she hires high school$-$ and college$-$aged employees on a part$-$time basis to cover the shifts needed to operate the business during the open hours and to have needed staff for the busiest times based on history. Because she is in easy walking distance from two large schools, she has regular walk$-$up busy periods as well as drive$-$up traffic patterns. Julia timely made four equal quarterly payments of $$20,000$ for federal tax purposes.

Julia has purchased the following assets for the business since she began the coffee shop business. She opted for all assets to use regular MACRS for the useful life as noted in the CLADR tables, rather than any special depreciation, section $179,$ or expensing any part of the equipment as start$-$up costs.

The building is a custom$-$built prefab structure that is currently plumbed, powered, and "permanently" placed on rented land$$although it could in the future be moved.

Julia uses her personal vehicle to pick up certain supplies and food products that she purchases from local small businesses to sell at her shop. Julia drives a $2018$ Toyota Corolla which she purchased new on February $15,2017,$ for $$32,000.$

She has always used the standard mileage rate and keeps track of her mileage on a log that she keeps in her car. From January $1,2022,$ through June $30,2022,$ she drove $726$ miles, and from July $1,2022,$ through December $31,2022,$ she drove $760$ miles. The other miles for the year that she drove her car were $15,462.$

View assets and complete the depreciation worksheet to continue. Enter numbers ONLY, no characters except for Date Placed in Service $($xx$/$xx$/$xxxx$).$

Complete the depreciation worksheet below. $($Only number entries for all but Date Placed in Service$)$

She has always used the standard mileage rate and keeps track of her mileage on a log that she keeps in her car. From January $1,2022,$ through June $30,2022,$ she drove $726$ miles, and from July $1,2022,$ through December $31,2022,$ she drove $760$ miles. The other miles for the year that she drove her car were $15,462.$

Calculate the amount of Julia's vehicle expense deduction by entering the required information into the boxes.

Julia provided the inventory information and P & L for preparing her return. She uses the cost method for tracking her inventory. Select the links, or select from the menu to the right to view the documents.

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Cost of Goods Sold

When preparing Julia's tax return, for which lines on the P&L will you need to request additional detailed information from Julia?

Depreciation Expense, Vehicle Expense, Cost of Goods Sold.

Beverage and Food Sales, Cost of Goods Sold, Depreciation Expense, Vehicles.

Cost of Goods Sold, Vehicle Expenses, Utilities.

Vehicle Expense, Holiday Party for Employees, Cost of Goods Sold

Inventory Information

Beginning Inventory $15,500$

Purchased $487,700$

Ending Inventory $18,200$

Cost of Goods Sold $485,000$

Hav A Java

Profit and Loss Statement

For Year Ending December $31,2022$

Beverage and Food Sales $ $966,000$

Gross Revenue $966,000$

Beverage and Food COGS $485,000$

Wages for Baristas $($COGS$)$ $ $112,320$

Payroll taxes $($including unemployment$)8,986$

Total Cost of Goods Sold $606,306$

Gross Profit $359,694$

Advertising $6,500$

Depreciation Expense $2,498$

Supplies $28,000$

Vehicle Expense $900$

Office Supplies $2,000$

Utilities $7,200$

Rent for Land $24,000$

Insurance $4,000$

Holiday Party for Employees $1,500$

Total Expenses $76,598$

Net Income $ $283,096$

Julia has invested her profits from the last several years with BF Dutton, Inc. and has provided the Forms $1099$INT and $1099$DIV for $2022$ for her investment income. She has no other income for $2022$ and did not receive any Forms $1099$B$.$

Remember, this is a progressive test. Answer each question ONLY with the information that you have been provided up to the point of each question. The correct answer may NO