Please prepare 2015 Schedule C, Schedule SE and Form 4562 for Bill's Creations.
Bill is a licensed hair stylist and operates his own salon under the business name of "Bills Creations". Bill's Creations as well known for its selection and quality of men's hairpieces and women 's wigs. The business also sells a considerable quantity of beauty products (e.g., conditioners, shampoos, curling irons).
Bill's business consists of four to six stations operated by himself and other licensed beauticians. The beauticians who work in the salon are treated as independent contractors. Each pays Bill a monthly rental.
Bill's Creations is located at 4620 Grant Street, Cincinnati, OH 45221. The employer identification number is 31-0009521.
The building in which the business is located is rented under a long-term lease for $1,100 each month. Bill pays his own utilities. The only employee Bill has is a shampoo person, who also performs light janitorial duties. Likewise, a local accounting group is on retainer to keep the financial records for the business.
Bill's Creations had the following receipts for 2015:
Sales of cosmetics $ 17,000
Sales of hairpieces, wigs 31,000
Fees received from customers by Frank
(including tips) 36,000
Rent charged from other beauticians 24,000
The amounts shown for the retail sales of cosmetics, hairpieces, and wigs, include state sales taxes.
Bill's Creations had the following expenses for 2015:
Purchases of cosmetics $ 6,980
Purchases of hairpieces, wigs 12,800
Operating supplies (shampoo,
color, permanent, etc.) 4,900
Rent for building 13,200
Utilities and telephone 4,800
Payroll expenses 5,200
Payroll taxes (FICA, FUTA,
State unemployment) 590
Sales taxes remitted to state 2,400
Health insurance coverage for
employee 1,810
City of Cincinnati occupation permit 300
State beautician license fee 310
Liability insurance premiums 4,800
Casualty insurance in business
Furnisings and equipment 1,400
Janitorial services 2,400
Accounting services 4,100
Magazine subscriptions for
Waiting room 200
Advertising 700
Fine paid to City of Cincinnati 200
Waiting room furniture 9,800
Bill decided completely renovate the furnishings in his waiting room. Consequently, he spent $9,800 for chairs, sofa, lamps, tables, etc., all placed in service on April 20, 2015. All of the items were new. The old furnishings were sold for $500; the furniture had a cost $5,200 when placed into service on June 14, 2000, and was fully depreciated. Bill has always followed a policy of claiming as much depreciation as soon as possible. All of his other business assets (e.g., hair dryers, work-stations chairs) have been fully depreciated by 2015. Before Bill moved into is current location, however, Bill customized the facilities for its intended use; he has leasehold improvements originally costing $35,000, placed into service on June 14, 2003.
The fine paid to the city was assessed by the Sanitation Department. Bill had failed, in accordance with a city ordinance, to separate the trash of the business into recyclable and non-recyclable bins.
Frank maintains an inventory as to the merchandise he sells. The business inventories (based on the lower of cost or market) are as follows:
12/31/2014 12/31/2015
Hairpieces and wigs $ 3,100 $ 2,700
Cosmetics 2,100 2,000
5,200 4,700
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Except for the inventory and purchases accounts, Bill operates the business on a cash method. Customers pay for services as rendered. Sales income is recorded when merchandise is sold.