Richard Norton recently purchased a farm. The farm is being operated as a sole proprietorship. Farm...

  

Transcribed Image Text:

Richard Norton recently purchased a farm. The farm is being operated as a sole proprietorship. Farm operations began on January 1, Year 1, and became profitable in Year 2. Richard uses the cash basis of accounting for book and tax purposes. During Year 2, Richard employed as many as 20 part-time workers, including Richard's spouse, Lucy, and children, Edward and Darla, ages 19 and 14, respectively. Lucy was unemployed during Year 1, and Richard had no other earned income for Year 1, except from the farm. Richard and Lucy filed a joint income tax return for Year 2 and Year 1. Richard and Lucy have consistently itemized deductions on their joint income tax return. Richard is not yet providing the farm employees with life insurance, medical and dental coverage, or retirement benefits. Richard is paying the life and medical insurance premiums for the family from personal funds. The following table includes a partial listing of the income and expense items that Richard recorded on the farm's books for Year 2. For each item of income and expense, indicate whether the item should be reported on Richard's Schedule F, shown elsewhere on the joint income tax return, or not included as income or deducted anywhere on the joint income tax return by clicking on the associated cell and selecting the appropriate response from the list provided. A. B 1 Reported on Joint Return 2 Revenues and Receipts 3 Cash receipts from sale of cattle bought for resale $201,300 4 Loan proceeds from farm line of credit $31,100 5 Bank interest income on Edward's personal bank account $300 6 Bank interest income on Richard's farm account $600 7 Expenses and Disbursements 8 Cost of cattle sold this year $113,800 9 Interest paid on farm line of credit loan $8,600 10 Principal repayments on farm line of credit loan $1,200 11 Chemicals and pesticides $8,100 12 Contribution to Richard's Roth IRA account $2,000 13 State estimated tax payments on farm earnings $2,300 14 Property taxes on the Norton home $1,700 15 Fertilizer costs $2,300 16 Farm travel expenses $1,200 17 Late payment penalties on farm payroll taxes $200 18 Livestock feed expenses $1,400 19 Repairs and maintenance on farm equipment $900 Richard Norton recently purchased a farm. The farm is being operated as a sole proprietorship. Farm operations began on January 1, Year 1, and became profitable in Year 2. Richard uses the cash basis of accounting for book and tax purposes. During Year 2, Richard employed as many as 20 part-time workers, including Richard's spouse, Lucy, and children, Edward and Darla, ages 19 and 14, respectively. Lucy was unemployed during Year 1, and Richard had no other earned income for Year 1, except from the farm. Richard and Lucy filed a joint income tax return for Year 2 and Year 1. Richard and Lucy have consistently itemized deductions on their joint income tax return. Richard is not yet providing the farm employees with life insurance, medical and dental coverage, or retirement benefits. Richard is paying the life and medical insurance premiums for the family from personal funds. The following table includes a partial listing of the income and expense items that Richard recorded on the farm's books for Year 2. For each item of income and expense, indicate whether the item should be reported on Richard's Schedule F, shown elsewhere on the joint income tax return, or not included as income or deducted anywhere on the joint income tax return by clicking on the associated cell and selecting the appropriate response from the list provided. A. B 1 Reported on Joint Return 2 Revenues and Receipts 3 Cash receipts from sale of cattle bought for resale $201,300 4 Loan proceeds from farm line of credit $31,100 5 Bank interest income on Edward's personal bank account $300 6 Bank interest income on Richard's farm account $600 7 Expenses and Disbursements 8 Cost of cattle sold this year $113,800 9 Interest paid on farm line of credit loan $8,600 10 Principal repayments on farm line of credit loan $1,200 11 Chemicals and pesticides $8,100 12 Contribution to Richard's Roth IRA account $2,000 13 State estimated tax payments on farm earnings $2,300 14 Property taxes on the Norton home $1,700 15 Fertilizer costs $2,300 16 Farm travel expenses $1,200 17 Late payment penalties on farm payroll taxes $200 18 Livestock feed expenses $1,400 19 Repairs and maintenance on farm equipment $900

Answer rating: 100% (QA)

Filing of schedule F for year 2 Revenues and receipts amt in Receipts from the sal... View the full answer