Question

Ben teaches golf lessons at a country club under a business called Ben’s Pure Swings (BPS). He operates this business as a sole proprietorship on the accrual basis of accounting. This year BPS billed clients for $86,700 and collected $61,000 in cash for golf lessons completed during the year. In addition, BPS collected an additional $14,500 in cash for lessons that will commence after year end. Ben hopes to collect about half of the outstanding billings next year but the rest will likely be written off.  

Besides providing private golf lessons, BPS also contracted with the country club to staff the driving range. This year BPS billed the country club $27,200 for the service. The club paid $18,000 of the amount but disputed the remainder. By year end the dispute had not been resolved, and while Ben believes he is entitled to the money, he has still not collected the remaining $9,200.

Continuing the facts from the prior question, BPS has accrued the following expenses (explained below):

               Bad Debt expense                                     $12,850

               Advertising (in the clubhouse)                       13,150
               Pro Golf Teachers Membership Fees               860
               Supplies (golf tees, balls, etc.)                         4,720
               Club Rental                                                      6,800
               Malpractice Insurance                                      1,200
               Accounting Fees                                              9,820

The expenditures were all paid for this calendar year with several exceptions. First, Ben initiated his golfer’s malpractice insurance on July 1^st of this year. The $1,200 insurance bill covers the last six months of this calendar year and the first six months of next year. At year end Ben had only paid $600, but he has assured the insurance agent he would pay the remaining $600 early next year. Second, the amount paid for club rental ($100 per week) represents rental charges for the last six weeks of the previous year, for the 52 weeks in this calendar year, and the first 10 weeks of next year. Ben has also mentioned that BPS only pays for supplies that are used at the club. Although BPS could buy the supplies for half the cost elsewhere, Ben likes to “throw some business” to the golf pro shop because it is operated by his brother.

What is the amount of deductions claimed by BPS? (Excel spreadsheet template is provided)

Answer 1

Answer:-

• Under the gathering strategy ,income are by and large record under the all occasions test as earned or got .
• Henceforth except if the deferral technique race has been made ,BPS will perceive $ 1,01,200 of exercise income (86,700 + 14,500= 1,01,200 )this year .
• BPS will just perceive 16,000 of driving extent income on the grounds that the rest of the measure of the salary isn't "settled and definable".
• With respect to, BPS can't guarantee a conclusion for evaluated noncollectable records in light of the fact that direct compose - off is the strategy managed by the IRC.
• BPS paid 600 of protection premises and is obligated for $600 of the rest of the premises .
• However , protection is an installment risk and just installment fulfills financial execution.
• Except if BPS has allotted to represent the protection as a repeating item,the reasoning is constrained to $600 .
• Under the gathering technique and monetary execution rentis deducted over the term of the rent .
• Thus BPS can just deduct the club rents identifying with the present year (100 * 52) .at long last ,no doubt half of the cost of provisions isn't deductible since it is preposterous in sum .
• There are no clear issues with deducting the installments for publicizing participation expenses or bookkeeping charges .