Problem 3-1 (Algorithmic) Schedule C (LO 3.1, 3.3, 3.5, 3.7)

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 12/31/2020
	Current Period			Prior Period
	1/1/2020 to 12/31/2020			1/1/2019 to 12/31/2019
REVENUES
Tax Services	$142,000			$72,154
Accounting Services	14,200			50,256
Other Consulting Services	31,240			7,690
TOTAL REVENUES	187,440			130,100
COST OF SERVICES
Salaries	28,400			29,400
Payroll Taxes	2,387			2,275
Supplies	300			1,225
TOTAL COST OF SERVICES	31,087			32,900
GROSS PROFIT (LOSS)	156,353			97,200
OPERATING EXPENSES
Advertising and Promotion	2,000
Business Licenses and Permits	620			250
Charitable Contributions	450			250
Continuing Education	1,500
Dues and Subscriptions	1,640			3,500
Insurance	8,520			870
Meals and Entertainment	6,390			5,400
Office Expense	2,840
Postage and Delivery	85
Printing and Reproduction	1,420
Office Rent	4,260			13,800
Travel	5,680			750
Utilities	1,704			2,724
TOTAL OPERATING EXPENSES	37,059			27,544
NET INCOME (LOSS)	$119,294			$69,656

Scott also mentioned the following:

• The expenses for dues and subscriptions were his country club membership dues for the year.
• Of the charitable contributions, $50 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, 2017 and drove it 3,457 miles for business, 2,074 miles for commuting, and 4,148 miles for nonbusiness purposes. His wife has a car for personal use.

Complete Schedule C for Scott showing Scott's net taxable profit 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.

Part II

Expenses. Enter expenses for business use of your home only on line 30.

8

Advertising . . . . . . . . . . .

8

fill in the blank 5

18

Office expense (see instructions) . .

18

fill in the blank 6

9

Car and truck expenses (see

19

Pension and profit-sharing plans . . .

19

instructions). . . . . . . . . . . .

9

fill in the blank 7

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

fill in the blank 8

12

Depletion . . . . . . . . . . . .

12

21

Repairs and maintenance . . . . . . . . .

21

13

Depreciation and section 179

22

Supplies (not included in Part III) . . .

22

fill in the blank 9

expense deduction (not included in Part III)

23

Taxes and licenses . . . . . . . . . . . . .

23

fill in the blank 10

(see instructions) . . .

13

24

Travel and meals:

14

Employee benefit programs

a

Travel. . . . . . . . . . . . . . . . . . . . .

24a

fill in the blank 11

(other than on line 19) . . . . .

14

b

Deductible meals

15

Insurance (other than health)

15

fill in the blank 12

(see instructions) . . . .

24b

fill in the blank 13

16

Interest (see instructions):

25

Utilities . . . . . . . . . . . . . . . . . . . .

25

fill in the blank 14

a

Mortgage (paid to banks, etc.)

16a

26

Wages (less employment credits) . . .

26

fill in the blank 15

b

Other . . . . . . . . . . . . . . . .

16b

27a

Other expenses (from line 48) . . . . . .

27a

fill in the blank 16

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

fill in the blank 17

29

Tentative profit or (loss). Subtract line 28 from line 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29

fill in the blank 18

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 Schedule 1 (Form 1040), line 3, 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

fill in the blank 19

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 Schedule 1 (Form 1040), line 3, 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) 2020

Schedule C (Form 1040) 2020

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