Stephanie Zane is the sole proprietor of Shear Madness, a hair salon. Her revenue comes from two sources, haircuts and the sale of hair products. Stephanie has three employees whose compensation consists of a weekly salary and a 40% com- mission on the services they provide to the customer. Stephanie uses a hybrid method of accounting-the cash method for haircuts and the accrual method for sales of hair products. For the current year she has the following revenue and expenses:
|
Revenue from haircuts
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$141,650
|
|
Revenue from the sale of products
|
36,240
|
|
Beginning inventory of product
|
1,756
|
|
Ending inventory of product
|
1,469
|
|
Product purchased
|
18,345
|
|
Gross salaries (including commission)
|
66,000
|
|
Social Security taxes
|
5,049
|
|
Employee withholding:
|
|
|
Social Security taxes
|
5,049
|
|
Federal taxes
|
15,200
|
|
State taxes
|
4,200
|
|
Other payroll taxes
|
375
|
|
Advertising
|
1,200
|
|
Rent
|
12,100
|
|
Utilities
|
1,600
|
|
Phone
|
570
|
|
Postage
|
220
|
|
Accounting fees
|
1,200
|
|
Legal fees
|
625
|
Complete Form 1040 Schedule C (Profit or Loss From Business) and Form 1040 Schedule SE (Self-Employment Tax) using the above information. Stephanie's Social Security number is 123-62-7897, her employer ID number is 05-9987561, and her business address is 99 Fortin Lane, Metuchen, New Jersey 07865. Forms and instructions can be downloaded from the IRS Web site (www.irs.gov/formspubs/ index.html).