Davy Jones needs to file taxes for his business and provides the following information.

Davy Jones needs to file taxes for his business and provides the following information.

Using your Tax Guide, you determine you're going to be required to prep 1040 Schedule C Profit or Loss form a Business and 1040 Schedule SE Self Employment Tax for Jones' Sole Proprietorship.

Davy Jones' Nautical Tours is owned and operated as a Sole proprietorship by David K. Jones (SSN 000-00-0000)

Principal Business or Professional Activity Code; 114110

Principal business; Charter fishing tours

Employer Identification Number 867530950

Business address    

1008 North Harbor Drive   

San Diego, CA 92103   

Home address

8700 Lake Murray Blvd #2

San Diego, 92119

• The cash accounting method is utilized
• Jones did materially participate in the operation of the business
• The business started January 1st, 2012

Wages consist of $25,000 paid to one employee and $15,000 to another

Depreciation expense; Jones owns a fishing boat, The Jolly Roger, which he purchased for $850,000. The depreciation on the income statement is book depreciation and will differ from what is actually used on Line 13 Depreciation of form 1040 Schedule C. 

The boat is depreciated using the Modified Accelerated Cost Recovery System (MACRS), half year convention, is in its 4th year of service and the 10-year recovery period is used. 

Utilize Publication 946 How to Depreciate Property to calculate the correct depreciation amount to enter on the 1040 Schedule C. Locate Table A1 in the Appendix to calculate the tax-deductible depreciation. 

Interest expense is interest paid on the loan for the boat

Insurance payments were made to cover liability for guests and for the boat

Payroll taxes; Federal Insurance Contributions Act (FICA); Social Security and Medicare payments made on the behalf of employees

Federal Insurance Contributions Act (FUTA) made on behalf of employees

Travel was purely for business purposes

Parking fines are tickets Jones received for parking illegally

Lease expense was paid to Honda Motors for his mother's car lease, who is not involved in the business in any way

Davy Jones' Nautical Tours 2016 Income Statement

Revenue

$ 400,950.00

Wages

$ 40,000.00

FICA

$ 3,060.00

FUTA

$ 85.00

Depreciation

$ 85,000.00

Interest

$ 43,900.00

Advertising

$ 6,350.00

Supplies

$ 23,795.00

Legal fees

$ 6,940.00

Insurance

$ 26,700.00

Boat slip rental

$ 33,010.00

Travel

$ 6,250.00

Office expense

$ 7,940.00

Parking fines

$ 1,350.00

Lease expense

$ 3,650.00

Net Profit

$ 112,920.00

Assignment Guidelines

To prepare the Sole Proprietorship's tax return, complete the following steps: