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Bunny started her own business in 2021. Using her expertise in forensic pathology spened a consulting business to provide her services to people who felt they needed more investigation into cases involving loved ones than the authorities could sometimes provide. She named her business B. A. Hunter Consulting (her middle name is Angelica). Bunny realizes that she is not an accountant and has likely made several mistakes in her bookkeeping efforts. She would like your help, not only in preparing her Schedule C, but also to provide some consulting services of your own to help her with her books in the following years. Hunter Consulting uses the cash method of accounting and Bunny has given you the following financial information for the year. Bunny needs you to prepare her 2021 Schedule C for her using all the information that follows. She also has the following additional questions and requests for you, since she has difficulty keeping her financial records organized. 1. Bunny will owe income taxes on her Schedule C income, which are paid through her Form 1040. Are there any taxes besides income taxes that she is responsible for paying, in relation to her Schedule C? Calculate the amount of these taxes. Where are they reported on the tax return? 2. Should any tax expense be included as an expense on her Schedule C? If so, what kind? 3. Include a detailed account listing for the Miscellaneous Expense account. 4. Bunny understands that she is not an accounting expert and realizes she has probably messed up her record keeping, especially when it comes to keeping her business and personal finances separate. As you prepare her Schedule C, Bunny would like you to provide the following, so that she can learn for next year: a. a list of expenses not deductible on Schedule C b. where those expenses would be deducted if they were deductible c. a list of revenues not includible on Schedule C d. where on the tax return those revenues would be included if required e a list of expenses that are not deductible anywhere on a personal tax return and why they are not deductible. Please clearly label these lists and present them in an organized fashion as your client has limited time and attention and is, after all, paying for your expertise. Please use the order given at the end of the assignment. Use the information provided in the income statement and the additional information provided by your client to prepare your client's Schedule C and to answer her questions, in addition to the requirements from your supervisor. The income statement from Bunny and the additional information follows. B.A.Hunter Consulting Income Statement For the year ended 12/31/2021 Total Revenues $ 57,400 $ 2,300 10,000 2,000 5,850 Interest expense Building downpayment Storage rent ($400 per month) Contract labor (1099's provided to all workers) Liability insurance premiums ($200 per month) Term life insurance premiums Lab supplies (three quarters will be used this year) Inventory Purchases Health insurance for Bunny Health insurance for Flower Depreciation Miscellaneous Expenses Inventory Purchases Employee salary Legal fees for building purchase Mortgage payments Total Expenses 2,400 1,100 1,000 2,000 500 800 1,265 8,096 1,000 14,000 3,000 2,400 57,711 Net Income (311) B.A.H. collected $31,000 in cash for jobs completed during the year and an additional $5,400 in cash for advance payments for jobs that will begin and be completed in the next year. Customers owe B.A.H. $2,400 at the end of the year for projects completed this year, and while Bunny isn't sure which bills will eventually be paid, she expects to collect all but about $800 of these outstanding revenues next year, Although Bunny operated B.A.H. out of the house when she started the business, she soon outgrew the space. She rented a small building to work from, paying rent of $400 per month for five months. Bunny purchased a small building on October 4 to use as a lab and storage space. To purchase the building, she borrowed $100,000 on a 30-year loan and paid $10,000 in cash as a down payment. In addition to the purchase price, Bunny incurred $3,000 in legal fees to complete the purchase of the building. She spent $2,400 in mortgage payments in November and December, including $1,800 in interest. At year end, B.A.H. had an inventory of chemicals, containers, and miscellaneous glassware to be used in anticipated future jobs. Her beginning inventory was $0 and her inventory as of December 31 was $499. As Bunny completes each job, she removes the items used from her inventory and adds the expense of these items to her clients' bills. Bunny, in an effort to support her new husband's interests, became active in local politics and contributed $150 to the August mayoral campaign of an independent candidate. She made the contribution, not just because of Forrest's interests, but because she believed that, if elected, the candidate would institute local policies beneficial to her business. The candidate lost the election and immediately started a grass roots lobbying organization. The purpose of the organization is to keep track of elected officials' campaign promises and report to the public when they vote contrary to their stated campaign promises. In September, Bunny paid $100 in dues to join the lobbying organization. Both the dues and the contribution were recorded in Miscellaneous Expense. Bunny and Flower went to a forensic pathologist conference in Reno, Nevada in November. Bunny included all of the travel costs in the Miscellaneous Expense account. In addition to attending the conference, Bunny and Flower enjoyed a "girls' day out" in Reno. Of the three days they spent in Reno, two of those days were spent attending the conference. They could have come home a day earlier, but the pair decided to stay the extra day to take advantage of Reno's tourist delights. The good news is, Bunny managed to win $4,000 which she contributed to her Schedule C business to help with cash flow. Travel costs consisted of the following: airfare of $1,200, $800 for three days and four nights at the Golden Nugget Hotel, dealer fees of $500 for the poker games they played, gambling losses of $300, $100 for martinis while playing poker, meals of $575 over the three days, and business center fees of $25 for sending faxes and printing documents so that B.A.H. Services could keep operating while Bunny and Flower were away. Interest expense includes interest paid on a $17,000 loan made to Bunny in July of this year to cover some of the costs of starting her business (not the same loan as the building loan). Bunny used the loan to pay for 3 months of rent, $2,698 to upgrade her wardrobe for professional clothing, uniforms, $1,000 in inventory purchases, $7,500 of Flower's salary, and $3,000 of the contract labor costs. She recorded the loan proceeds in Revenues and leftover funds were deposited into her business checking account. In July, Bunny purchased 12 months of liability insurance. On November 12 she also purchased a 12-month term life insurance policy on her one employee, Flower. Bunny paid Regressive Insurance Company $1,100, and in return Regressive promises to pay Bunny a $40,000 death benefit if Flower dies any time during the next 12 months. This policy is designed to cover lost revenues if anything happens to Flower, since without her help, Bunny could not manage B.A.H. and her full-time job. Bunny has other occasional workers who are considered contract labor. As a prominent state employee and the premier consultant in her field, Bunny must meet the highest standards of professionalism and beauty. She gets her hair cut at the most stylish salon in town and has spent $800 there since July. Regular salon haircuts would have cost $320. Bunny prefers to keep her hair in a ponytail but feels that her consulting business would suffer if she did. Because of this, Bunny has recorded $800 in salon fees as a business expense, in, you guessed it, the Miscellaneous Expense account. As a professional, Bunny must dress the part. She shopped for professional clothing this year and she wears this attire for her consulting meetings and days she spends in her office at her full-time job. The cost of her professional clothing was $2,698, also recorded in Miscellaneous Expense. Bunny hates to dress professionally, she would much rather wear jeans and t shirts. She never goes anywhere, besides work, in her professional attire, Bunny and Flower wear scrubs and lab coats when they are working. Bunny purchased these uniforms for herself and Flower, and her contract employees, at a cost of $848. All uniform costs were included in Miscellaneous Expense. Please help Bunny determine her net income from B.A.H. using a 2021 Form 1040 Schedule C. Don't forget to answer her questions. Please present these items to your client in the following order, stapled: 1.Cover sheet with the requested information 2. Handwritten Schedule C (all expenses from your tax basis income statement should be shown on the Schedule C in the places the IRS wants them.) 3. Income statement, per Bunny, in good form and the related tax basis income statement in good form (Prepare the income statement using ALL the information given, as the client has provided it, without making any adjustments for tax law. Then show the tax basis income statement, following tax law. Put the two income statements side by side for comparison.) 4. Miscellaneous Account detail (What costs are included in the Miscellaneous expense account per Bunny's Income statement?) 5. List of nondeductible expenses 6. List of expenses not deductible on Schedule C but deductible elsewhere on the return with the tax return location (form and line number). 7. List of nontaxable "revenue" items 8. List of revenues not includible on Schedule C but includible elsewhere on the return with the tax return location (form and line number). These lists are not required to be on separate pages, as long as they are plainly labeled and presented in order 9. Any workpapers required to reach your answers to the questions and/or to calculate the Schedule C results. 10. If you made notes on this assignment sheet, please turn it in at the back of your workpapers. ****Depreciation calculations are not required as Bunny has provided them to you. Nor are any additional forms for depreciation or asset purchases. ***** All amounts are at risk. ******If you use Excel or Word to nrenare your workmanor Bunny started her own business in 2021. Using her expertise in forensic pathology spened a consulting business to provide her services to people who felt they needed more investigation into cases involving loved ones than the authorities could sometimes provide. She named her business B. A. Hunter Consulting (her middle name is Angelica). Bunny realizes that she is not an accountant and has likely made several mistakes in her bookkeeping efforts. She would like your help, not only in preparing her Schedule C, but also to provide some consulting services of your own to help her with her books in the following years. Hunter Consulting uses the cash method of accounting and Bunny has given you the following financial information for the year. Bunny needs you to prepare her 2021 Schedule C for her using all the information that follows. She also has the following additional questions and requests for you, since she has difficulty keeping her financial records organized. 1. Bunny will owe income taxes on her Schedule C income, which are paid through her Form 1040. Are there any taxes besides income taxes that she is responsible for paying, in relation to her Schedule C? Calculate the amount of these taxes. Where are they reported on the tax return? 2. Should any tax expense be included as an expense on her Schedule C? If so, what kind? 3. Include a detailed account listing for the Miscellaneous Expense account. 4. Bunny understands that she is not an accounting expert and realizes she has probably messed up her record keeping, especially when it comes to keeping her business and personal finances separate. As you prepare her Schedule C, Bunny would like you to provide the following, so that she can learn for next year: a. a list of expenses not deductible on Schedule C b. where those expenses would be deducted if they were deductible c. a list of revenues not includible on Schedule C d. where on the tax return those revenues would be included if required e a list of expenses that are not deductible anywhere on a personal tax return and why they are not deductible. Please clearly label these lists and present them in an organized fashion as your client has limited time and attention and is, after all, paying for your expertise. Please use the order given at the end of the assignment. Use the information provided in the income statement and the additional information provided by your client to prepare your client's Schedule C and to answer her questions, in addition to the requirements from your supervisor. The income statement from Bunny and the additional information follows. B.A.Hunter Consulting Income Statement For the year ended 12/31/2021 Total Revenues $ 57,400 $ 2,300 10,000 2,000 5,850 Interest expense Building downpayment Storage rent ($400 per month) Contract labor (1099's provided to all workers) Liability insurance premiums ($200 per month) Term life insurance premiums Lab supplies (three quarters will be used this year) Inventory Purchases Health insurance for Bunny Health insurance for Flower Depreciation Miscellaneous Expenses Inventory Purchases Employee salary Legal fees for building purchase Mortgage payments Total Expenses 2,400 1,100 1,000 2,000 500 800 1,265 8,096 1,000 14,000 3,000 2,400 57,711 Net Income (311) B.A.H. collected $31,000 in cash for jobs completed during the year and an additional $5,400 in cash for advance payments for jobs that will begin and be completed in the next year. Customers owe B.A.H. $2,400 at the end of the year for projects completed this year, and while Bunny isn't sure which bills will eventually be paid, she expects to collect all but about $800 of these outstanding revenues next year, Although Bunny operated B.A.H. out of the house when she started the business, she soon outgrew the space. She rented a small building to work from, paying rent of $400 per month for five months. Bunny purchased a small building on October 4 to use as a lab and storage space. To purchase the building, she borrowed $100,000 on a 30-year loan and paid $10,000 in cash as a down payment. In addition to the purchase price, Bunny incurred $3,000 in legal fees to complete the purchase of the building. She spent $2,400 in mortgage payments in November and December, including $1,800 in interest. At year end, B.A.H. had an inventory of chemicals, containers, and miscellaneous glassware to be used in anticipated future jobs. Her beginning inventory was $0 and her inventory as of December 31 was $499. As Bunny completes each job, she removes the items used from her inventory and adds the expense of these items to her clients' bills. Bunny, in an effort to support her new husband's interests, became active in local politics and contributed $150 to the August mayoral campaign of an independent candidate. She made the contribution, not just because of Forrest's interests, but because she believed that, if elected, the candidate would institute local policies beneficial to her business. The candidate lost the election and immediately started a grass roots lobbying organization. The purpose of the organization is to keep track of elected officials' campaign promises and report to the public when they vote contrary to their stated campaign promises. In September, Bunny paid $100 in dues to join the lobbying organization. Both the dues and the contribution were recorded in Miscellaneous Expense. Bunny and Flower went to a forensic pathologist conference in Reno, Nevada in November. Bunny included all of the travel costs in the Miscellaneous Expense account. In addition to attending the conference, Bunny and Flower enjoyed a "girls' day out" in Reno. Of the three days they spent in Reno, two of those days were spent attending the conference. They could have come home a day earlier, but the pair decided to stay the extra day to take advantage of Reno's tourist delights. The good news is, Bunny managed to win $4,000 which she contributed to her Schedule C business to help with cash flow. Travel costs consisted of the following: airfare of $1,200, $800 for three days and four nights at the Golden Nugget Hotel, dealer fees of $500 for the poker games they played, gambling losses of $300, $100 for martinis while playing poker, meals of $575 over the three days, and business center fees of $25 for sending faxes and printing documents so that B.A.H. Services could keep operating while Bunny and Flower were away. Interest expense includes interest paid on a $17,000 loan made to Bunny in July of this year to cover some of the costs of starting her business (not the same loan as the building loan). Bunny used the loan to pay for 3 months of rent, $2,698 to upgrade her wardrobe for professional clothing, uniforms, $1,000 in inventory purchases, $7,500 of Flower's salary, and $3,000 of the contract labor costs. She recorded the loan proceeds in Revenues and leftover funds were deposited into her business checking account. In July, Bunny purchased 12 months of liability insurance. On November 12 she also purchased a 12-month term life insurance policy on her one employee, Flower. Bunny paid Regressive Insurance Company $1,100, and in return Regressive promises to pay Bunny a $40,000 death benefit if Flower dies any time during the next 12 months. This policy is designed to cover lost revenues if anything happens to Flower, since without her help, Bunny could not manage B.A.H. and her full-time job. Bunny has other occasional workers who are considered contract labor. As a prominent state employee and the premier consultant in her field, Bunny must meet the highest standards of professionalism and beauty. She gets her hair cut at the most stylish salon in town and has spent $800 there since July. Regular salon haircuts would have cost $320. Bunny prefers to keep her hair in a ponytail but feels that her consulting business would suffer if she did. Because of this, Bunny has recorded $800 in salon fees as a business expense, in, you guessed it, the Miscellaneous Expense account. As a professional, Bunny must dress the part. She shopped for professional clothing this year and she wears this attire for her consulting meetings and days she spends in her office at her full-time job. The cost of her professional clothing was $2,698, also recorded in Miscellaneous Expense. Bunny hates to dress professionally, she would much rather wear jeans and t shirts. She never goes anywhere, besides work, in her professional attire, Bunny and Flower wear scrubs and lab coats when they are working. Bunny purchased these uniforms for herself and Flower, and her contract employees, at a cost of $848. All uniform costs were included in Miscellaneous Expense. Please help Bunny determine her net income from B.A.H. using a 2021 Form 1040 Schedule C. Don't forget to answer her questions. Please present these items to your client in the following order, stapled: 1.Cover sheet with the requested information 2. Handwritten Schedule C (all expenses from your tax basis income statement should be shown on the Schedule C in the places the IRS wants them.) 3. Income statement, per Bunny, in good form and the related tax basis income statement in good form (Prepare the income statement using ALL the information given, as the client has provided it, without making any adjustments for tax law. Then show the tax basis income statement, following tax law. Put the two income statements side by side for comparison.) 4. Miscellaneous Account detail (What costs are included in the Miscellaneous expense account per Bunny's Income statement?) 5. List of nondeductible expenses 6. List of expenses not deductible on Schedule C but deductible elsewhere on the return with the tax return location (form and line number). 7. List of nontaxable "revenue" items 8. List of revenues not includible on Schedule C but includible elsewhere on the return with the tax return location (form and line number). These lists are not required to be on separate pages, as long as they are plainly labeled and presented in order 9. Any workpapers required to reach your answers to the questions and/or to calculate the Schedule C results. 10. If you made notes on this assignment sheet, please turn it in at the back of your workpapers. ****Depreciation calculations are not required as Bunny has provided them to you. Nor are any additional forms for depreciation or asset purchases. ***** All amounts are at risk. ******If you use Excel or Word to nrenare your workmanor