Question

Sherry Hopson owns a retail family clothing store. Her store is located at 4321 Heather Drive, Henderson, NV 89002. Her employer identification number is 95-1234321 and her Social Security number is 123-45-6789. Sherry keeps her books on an accrual basis. The income and expenses for the year are:

Gross sales $351,700 Returns and allowances 4,000 Expenses: Beginning inventory (at cost) $ 84,300 Add: purchases 100,700 Cost of goods available for sale 185,000 Less: ending inventory (at cost) 75,000 Cost of goods sold $110,000 Rent 23,800 Insurance 1,500 Legal and accounting fees 2,800 Payroll 37,200 Payroll taxes 3,440 Utilities 1,850 Office supplies 750 Advertising 2,100

Sherry’s bookkeeper has provided the book-basis fixed asset roll forward to be used in computing the depreciation. The tax lives of the assets are the same as the book lives shown in the fixed asset schedule. The truck is not considered a passenger automobile for purposes of the luxury automobile limitations. No Section 179 election is made. For tax purposes, Sherry elected out of bonus depreciation in all years except 2017.

Required:
Complete Sherry's Schedule C and Form 4562.

Make realistic assumptions about any missing data.

Enter all amounts as positive numbers.

If an amount box does not require an entry or the answer is zero, enter "0".

If required round any dollar amount to the nearest dollar.

Click here to access the depreciation table to use for this problem.

Sherry’s bookkeeper has provided the following book-basis fixed asset rollforward:

Hopson Retail Fixed Asset Rollforward 12/31/2017 (book basis)
		DEPR		COST		2015	2016	2017		ACCUM		NET BOOK
ASSET	IN SERVICE	METHOD	LIFE	BASIS		DEPR	DEPR	DEPR		DEPR		VALUE
CASH REGISTER	2/15/2015	SL	5	9,800.00		1,796.67	1,960.00	1,960.00		5,716.67		4,083.33
2015 TOTAL ADDITIONS				9,800.00		1,796.67	1,960.00	1,960.00		5,716.67		4,083.33
RETAIL FIXTURES	10/12/2016	SL	7	4,500.00			160.71	642.86		803.57		3,696.43
FURNITURE	10/12/2016	SL	7	3,600.00			128.57	514.29		642.86		2,957.14
2016 TOTAL ADDITIONS				8,100.00		-	289.28	1,157.15		1,446.43		6,653.57
TOTAL				17,900.00		1,796.67	2,249.28	3,117.15		7,163.10		10,736.90
DELIVERY TRUCK	6/1/2017	SL	5	32,000.00				3,733.33		3,733.33		28,266.67
DESK AND CABINETRY	6/1/2017	SL	7	17,000.00				1,416.67		1,416.67		15,583.33
COMPUTER	6/1/2017	SL	5	3,500.00				408.33		408.33		3,091.67
2017 TOTAL ADDITIONS				52,500.00		-	-	5,558.33		5,558.33		46,941.67
TOTAL				70,400.00		1,796.67	2,249.28	8,675.48		12,721.43		57,678.57

The entire Form 4562 and Schedule C would be greatly helpful. However, I am struggling for the solution to Line 17 on the Form 4562.

Answer 1

Hi there,

Line No form C	particulars		Amount
1	Sales		351,700
2	Returns		4,000
3	Net sales		347,700
4	COGS		110,000
5	Gross profit		237,700
6	Other income		-
7	Gross income		237,700
8	Advertising		2,100
13	Depreciation		33,766
15	Insurance		1,500
	Rent		23,800
17	Legal and accounting fee		2,800
18	Utilities		1,850
22	Office supplies		750
23	Payroll taxes		3,440
26	Payroll		37,200
28	Total expenses		107,206
29/31	Net profit		130,494

Depreciation:

Depreciation
MACRS depreciation on assets placed in service before 2016	3651
Bonus depreciation on assets placed in service during the year	25500
MACRS depreciation on assets placed in service during the year	4,615
Total depreciation	33,766

	a	b=a*50%	c=a-b	d	e=c*d
Asset	Depreciable basis	Bonus depreciation @50%	MACRS depreciable basis	MACRS depreciation rate	MACRS depreciation
Heavy duty truck	31000	15500	15500	20%	3,100
Desk and file cabinet	17000	8500	8500	14.29%	1,215
Computer	3000	1500	1500	20%	300
		25500			4,615