Maria A Solo (SSN 318-01-6921) lives at 190 Glenn drive, grand rapids, Michigan 49527-2005.

Maria A Solo (SSN 318-01-6921) lives at 190 Glenn drive, grand rapids, Michigan 49527-2005.  Maria (age 45 and single) claims her aunt, Selda Ray (ssn 282-61-4011), as a dependent.  Selda lives with Maria.  Maria owns and operates the Reliable drug company at 1816 first st in grand rapids, Michigan 49503-1902, in which she materially participates the entire year.  Her EIN is 38-9654321.  Employer quarterly payroll tax returns were filed as required, and Maria values her inventory at cost.  The income statement for 2013 is reproduced on the next page.  Maria reports on the accrual method, but uses the “direct write-off” method to compute bad debt expense.  Her business code is 446110.  She does not deduct expenses for an office in her home.

 

An examination of Maria’s business records reveals that the depreciable property includes furniture, a delivery truck, and store equipment.  The depreciation expense shown on the 2015 income statement meets the income tax requirements for depreciation for using the mentioned assets during 2015.  Maria rounds calculations to the nearest dollar.  Miscellaneous expenses include the following:

 

Reimbursement to Maria for actual expense of a business trip

            ($256 for airfare and lodging, $70 for meals)                   $326

Contributions to the Red Cross and United Way                          350

Chamber of Commerce dues                                                                       125

Personal electric bill for August                                                        80

Total Miscellaneous expenses                                                         $881

 

Other income for Maria includes a salary of $100 each month for her services as a member of working committee of the Drug Association.  Her form W-2 from the association shows gross wages of $1,200 and federal income tax withheld of $296.  Maria also earned $320 in taxable interest.  Maria made federal estimated tax payments totaling $5,000 during 2013.  This amount is reported in the Payments section on Form 1040, page 2.

 

Prepare Form 1040, and Schedules C, and SE for Maria Solo using the forms provided on the pages that follow. Maria does not want $3 to go to the Presidential election campaign fund. She signs her return on April 15, 2016.


 

                                                RELIABLE DRUG COMPANY

                                                            Income statement

                                    For the year ended December 31, 2013

 

Operating Revenue:             

   Sales                                                                                                                        $324,200

   Less sales returns and allowance                                                                           (3,390)

   Net Sales                                                                                                     $320,810

 

Cost of merchandise sold:

   Merchande inventory, beginning                                     $68,920

 

   Purchases                                                                           $198,240

   Less purchase returns and allowances                               (8,100)

   Net purchase                                                                      $190,140

 

   Merchandise available for sale                                         $259,060

   Less merchandise inventory, ending                                 (69,185)

   Cost of merchandise sold                                                                          (189,875)

Gross profit on sales                                                                                                $130,935

 

Operating expenses:

   Advertising expense                                                          $6,541

   Bad debt expense (direct write off method)                       850

   Car and truck expense                                                      7,967*

   Depreciation expense                                                        3,396

   Insurance expense (other than health)                           644

   Miscellaneous expense                                                      881

  Payroll taxes                                                                                    3,471

  Rent expense (other than business property)                12,000

  Telephone and utilities expense                                       2,395

  Wages expense                                                                   62,500           

  Total operating expense                                                                            (100,645)

 

Net income                                                                                                     $30,290

 

*Maria drove her personal automobile for 13,856 business miles during the year.  Total miles for the year were 32,815.  There were 1,300 commuting miles.  This is Maria’s only car.  She has kept a written log documenting her business miles.  Maria first used the car in her business on May 4, 2013.  She uses the standard mileage method.
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