The sole proprietor of shear madness

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Reference no: EM131097303

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	$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).

Reference no: EM131097303

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