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

question 55

Essay

Judy is a self-employed musician who performs for a variety of events. This year, Judy was fined $250 by the city for violating the city's noise ordinance with a relatively loud performance. As a consequence, Judy contributed $1,000 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 $33,000 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 $55,000 rather than $33,000. 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:

Consolidated Statement

A financial statement that aggregates the financial performance of a company and its subsidiaries, presenting it as if the group were a single entity.

Comprehensive Income

The sum of net income and other comprehensive income, representing the total change in equity for a period other than transactions with owners.

Gross Margin

The difference between revenue and cost of goods sold, divided by revenue, expressed as a percentage; an indicator of the financial health and performance of a business.

Consolidated Retained Earnings

The cumulative amount of profits kept by a parent company and its subsidiaries after dividends have been paid.