Judy Is a Self-Employed Musician Who Performs for a Variety

question 60

Essay

Judy is a self-employed musician who performs for a variety of events. This year, Judy was fined $330 by the city for violating the city's noise ordinance with a relatively loud performance. As a consequence, Judy contributed $840 to a campaign committee formed to recall the city's mayor. Judy normally hires three part-time employees to help her schedule events and transport equipment. Judy paid a total of $34,600 to her employees through June of this year. In June, Judy fired her part-time employees and hired her husband to replace them. However, Judy paid him $53,400 rather than $34,600. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as business expenses.

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Definitions:

Net Cash

The amount of cash available after all cash inflows and outflows have been accounted for, including both operating activities and investments.

Financing Activities

Transactions related to a company's raising or repaying capital, such as issuing shares, paying dividends, or taking on new loans.

Cash Dividends

Money distributed by a corporation to its shareowners, frequently as a dividend from profits.

Operating Activities

Transactions and other events that are not investing or financing activities, usually involving the production and delivery of goods and services.