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 $194,800 $72,154 Accounting Services 19,480 50,256 Other Consulting Services 42,856 7,690 TOTAL REVENUES 257,136 130,100 COST OF SERVICES Salaries 38,960 29,400 Payroll Taxes 2,387 2,275 Supplies 300 1,225 300 1,225 41,647 32,900 215,489 97,200 2,000 620 250 450 250 Supplies TOTAL COST OF SERVICES GROSS PROFIT (LOSS) OPERATING EXPENSES Advertising and Promotion Business Licenses and Permits Charitable contributions Continuing Education Dues and Subscriptions Insurance Meals and Entertainment Office Expense Postage and Delivery Printing and Reproduction Office Rent 1,500 1,640 3,500 870 11,688 8,766 5,400 3,896 85 1,948 5,844 13,800 Travel 7,792 750 2,338 2,724 Utilities TOTAL OPERATING EXPENSES 48,517 27,544 NET INCOME (LOSS) $166,972 $69,656 NET INCOME (LOSS) $166,972 $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 4,743 miles for business, 2,846 miles for commuting, and 5,692 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. OMB No. 1545-0074 SCHEDULE C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Go to www.irs.gov/Schedule for instructions and the latest information. Attach to Form 1040, 1040-SR, 1040-NR, or 1041; partnerships generally must file Form 1065. 2020 Department of the Treasury Internal Revenue Service (99) 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) Acc Services Enter code from instructions 541211 D Business name. If no separate business name, leave blank. Scott Butterfield, CPA Employer ID number (EIN), (see instr.) Scott Butterfield, CPA (see instr.) E F G Yes No H Yes E No Yes No Business address (including suite or room no.) 678 Peso Drive City, town or post office, state, and ZIP code La Mesa, CA 92041 Accounting method: (1) Cash (2) - Accrual (3) - Other (specify) Did you "materially participate in the operation of this business during 2020? If "No," see instructions for limit on losses If you started or acquired this business during 2020, check here .... I Did you make any payments in 2020 that would require you to file Form(s) 1099? (see instructions). j If "Yes," did you or will you file required Forms 1099?.... Part I Income i 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 Returns and allowances... Subtract line 2 from line 1 Cost of goods sold (from line 42). Gross profit. Subtract line 4 from line 3 5 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) Gross income. Add lines 5 and 6 .. 257,136 2 2 3 4 4 5 6 6 7 7 6 7 Other income, including rederal and state gasoline or fuel tax credit or rerund (see Instructions) 7 Gross income. Add lines and 6 7 Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising .. 8 18 Office expense (see instructions) .. 18 9 Car and truck expenses (see 19 Pension and profit-sharing plans... 19 instructions).. 9 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 12 Depletion ... 12 21 Repairs and maintenance. 21 13 Depreciation and section 179 22 Supplies (not included in Part III)... 22 expense deduction (not included in 23 Taxes and licenses. 23 Part III) (see instructions)... 13 24 Travel and meals: 14 Employee benefit programs a Travel... 24a (other than on line 19).... 14 b Deductible meals 15 Insurance (other than health) 15 (see instructions) .... 24b 16 Interest (see instructions): 25 Utilities 25 a Mortgage (paid to banks, etc.) 16a 26 26 Wages (less employment credits)... 27a Other expenses (from line 48)...... b Other 16b 27a 26 27a 28 30 a Mortgage (paid to banks, etc.) 16a 26 Wages (less employment credits)... b Other 16b 27a Other expenses (from line 48). 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 . 29 Tentative profit or loss). Subtract line 28 from line 7. 29 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 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. 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 32a - All investment is 2. (If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, } at risk. line 3. 32b - Some investment . If you checked 32b, you must attach Form 6198. Your loss may be limited. is not at risk. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2020 31 32 2. (If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, at risk. line 3. 32b - Some investment . If you checked 32b, you must attach Form 6198. Your loss may be limited. is not at risk. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2020 a 34 35 35 Schedule C (Form 1040) 2020 Part III Cost of Goods Sold (see instructions) 33 Method(s) used to value closing inventory: Cost b - Lower of cost or market - Other (attach explanation) Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation ... Yes O No Inventory at beginning of year. If different from last year's closing inventory, attach explanation .... Purchases less cost of items withdrawn for personal use. ... 36 Cost of labor. Do not include any amounts paid to yourself. .. 37 Materials and supplies .... 38 Other costs.. Add lines 35 through 39 40 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 36 37 38 39 39 40 41 42 Information on Vnur Vohirla comnlnto thir nart onlif VAI A claiming car ar turli ovnencor on linn and are not renuired to fila 40 Add lines 35 through 39 40 41 42 Part IV Inventory at end of year 41 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4.... 42 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. When did you place your vehicle in service for business purposes? (month/day/year) of the total number of miles you drove your vehicle during 2020, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) c Other 43 44 45 Was your vehicle available for personal use during off-duty hours? 46 Do you (or your spouse) have another vehicle available for personal use? 47a Do you have evidence to support your deduction? b If "Yes," is the evidence written? Party Other Expenses. List below business expenses not included on lines 8-26 or line 30. 44 of the total number of miles you drove your vehicle during 2020, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) c Other Was your vehicle available for personal use during off-duty hours? 45 46 Do you (or your spouse) have another vehicle available for personal use? Do you have evidence to support your deduction?. 47a b If "Yes," is the evidence written?. Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. 48 Total other expenses. Enter here and on line 27a . 48 Schedule C (Form 1040) 2020