Your office is picking up a new client and you have been assigned the task of preparing the impact of his recent business acquisition on his 2021 tax estimate. In the past, he used online software to prepare his tax return. Changes in his personal circumstances, as well some significant changes in his asset holdings, have him reaching out to a professional for assistance. SpongeBob SquarePants is an up-and-coming chef. He owns and operates a restaurant, The Krusty Krab, as a sole proprietorship. He spent many years working as a fry cook, but recently acquired the restaurant and the secret recipe for its famous menu item- The Krabby Patty. In February 2021 he inherited a substantial amount of cash when his grandfather died. He used $250,000 to purchase The Krusty Krab and he started his operations on April 1st. He friend Sandy has helped him keep a good record of his cash receipts and disbursements, but he doesn't know how to this translates to taxable income on his 2021 tax return. Your reviewer has asked you to calculate the taxable income impact of The Krusty Krab on SpongeBob's 2021 tax return based on the information he has provided. Your projection will be used during a meeting and discussion with SpongeBob (who has a limited financial background), so it should be in a user-friendly format, with necessary supporting details for your manager to review. Use Excel to build your projection model. It should contain necessary details from the information provided. Take advantage of features in excel so that numbers can be easily updated (copy, sum total, formulas etc.) The lead sheet, which is the client deliverable, should contain the summary; details for supporting calculations can be shown on additional sheets (which make up the reviewer details), if needed. Highlight areas of significant importance. You can footnote or explain as you deem appropriate. The Krusty Krab Net Income Projection Restaurant Sales Revenue Promotional Appearances Total Revenue BOOK 950,000 5,000 955,000 Expenses Ingredients (burgers, fries, condiments etc.) Packaging (wrap, bags, napkins etc.) Small trinkets (kids meals) Customer satisfaction refunds Insurance Rent 280,000 160,000 40,000 14,325 30,000 27,000 Utilities Payroll 9,000 103,000 Payroll Taxes 11,330 Uniforms 3,500 City Assessment 4,000 Dues 5,000 Other 32,000 Restauranteur Seminar Airfare 4,500 Registration 2,000 Supplies 500 Promotional Items 500 Apparel 400 Taxis 150 Hotel 3,000 Meals 1,800 Entertainment 1,200 Total Expenses Net Income 733,205 221,795 PAYROLL TAXES EMPLOYER EMPLOYEE 12.4% OF FIRST 142,800 6,20% 6.20% WAGES 5 100,000 EMPLOYER $ 7,650 job 1 6200 EMPLOYEE $ 7,650 job 2 $200 MEDICARE 2.9% OF TOTAL 1.45% 1.45% 12400 WAGES 200000 EMPLOYER SS $ 8,854 TOTAL 15.3% TOTAL 7.65% 7.65% EMPLOYEESS $ 8,854 mas $ 8,854 EMPLOYER MED S 2,900 refund $ 3,546 EMPLOYEE MED 5 2,900 SELF EMPLOYED INDIVIDUALS MUST PAY BOTH HALVES THEMSELVES! This is payroll tax but it is calculated, reported and remitted with the 1040 One half of self-employment taxes is a deduction for AG (ATL) The self-employment tax base is 92.35% 1100-0765) of self employment income Subject to same cap on FICA SELF-EMPLOYMENT INCOME $ TAXABLE PORTION 100,000 $200,000 92.35% 92.35% SUBJECT TO SE $ 92,350 $ 184,700 FICA (12.4% OF FIRST 142,800) $ 11,451 $ 17,707 MEDICARE (2.9% OF ALL) $ 2,678 $ 5,356 TOTAL tax 5 14,130 $ 23,064 1/25 DEDUCTION ATL $ 7,065 $ 11,532