Accounting-Tax-Business Transactions Deductions Methods
Prepare a research paper on deduction methods. Your research should rely on the case below:
Zoe had the following events in her business in 2018. Her business locates, purchases, and refurbishes collectible assets for its clients. Zoe uses the accrual accounting method but does not maintain significant inventory.
1. Zoe received a contract to sell gadgets to the city, provided that tested samples functioned properly. In December 2018 that would be tested in February 2019 worth $24,000. The cost of these gadgets was $17,000.
2. Zoe paid $360 to entertain a client from out of town. The client did not discuss business with Zoe, but she would like to keep in touch and to encourage future business deals in the following years.
3. On November 1, 2018, Zoe paid $1,200 for $80,000 life insurance on her key executives over the next 12 months.
4. At the end of the year, the business reported $18,000 of accounts receivables with an estimated $4,000 of uncollectibles.
5. In December 2018, Zoe rented equipment to complete jobs and paid $6,000 for three months of rent required as a minimum by the leasing company or $2,000 per month. The job was competed before the end of the year, but the equipment was returned at the end of February 2019, the end of the lease.
6. Zoe hired a new marketer and send him to Atlanta for a week to contact out of state clients. The employee was reimbursed for the following expenses: $600 for airfare, $700 for lodging, and $500 for meals and entertainment. Each expense had adequate documentation to support the business purpose as an established policy.
7. Zoe usually uses her personal Mercedes-Benz to commute to her office. She uses the Lexus for business travel from the office. However, the Lexus broke down in one month, so she was forced to use her Mercedes to attend business functions and events in addition to commuting. She accumulated 240 miles for business purposes and 46 miles commuting from home to work and back (ignore other mileage for the year). Zoe uses the standard mileage rate to determine her auto-related business expenses.
8. Zoe visited her parents in Omaha over the Christmas holidays. While there, she spent $100 to attend a half-day business seminar. Zoe paid $400 for airfare, $100 for meals during the seminar, and $40 on Uber transportation to the seminar.
Requirements:
• Explain how the above-listed transactions would theoretically affect her sole proprietor business taxable income. Use tax provisions of the most recent Tax Reform Act.
• Determine the impact of each of these transactions on Zoe’s taxable income.
• Fill out the proper tax form that Zoe must complete to account for these transactions. Convert it to a Word document from a PDF or embed your PDF into the Word document.
