1.Ethan's 2019 paycheck showed gross income of $104,900.

2.Mary's business consists of the following:

a.Mary uses the accrual method of accounting for her business.

b.Mary's sales from her business generated gross receipts of $210,000 in 2019.

c.Additionally, she received $35,000 for services rendered in 2019.

d.She also received $75,000 on accounts receivable from services rendered last year.

e.Last year she started a new monthly service she was offering to her clients.In 2017 she received $105,000 for services to be provided monthly from July 2018 through June 2020.

f.In November 2019 she also received $147,000 for consulting services to be provided monthly from November 2019 through October 2021.

g.During 2019, she wrote checks for $170,120 related to her business.An Excel spreadsheet that includes a detailed list of Mary's expenditures (and a template for computing tax depreciation) is on a separate document.

1 2 Client: Mary Varela Business 3 Schedule: Cash disbursements 4 Date: December 31, 2019 5 6 7 Description Amount 8 Purchases of office supplies 17,400 9 Down Pa ment on Machine #3 20,000 IMachine #3 payments I 1,850 Advertising ' 7,200 Telephone & utilities 2,500 Copy Machine payments 7,320 Ofce rent 24,000 Liability & property insurance 7,500 Routine repairs made 2,000 Wages paid to part-time employees 40,000 Employer portion of Payroll taxes (for part-time employees) 6,350 Business Meals (with customers) 4,400 Business Entertainment expenses 8,000 Estimated federal tax payments 15,000 Contribution to political campaign of friend who is running for city council 3,000 Contibution to National Libertarian Party 2,000 Occupational license 1,600 Total cash disbursements $170,120 Taxable Income Amount Explanation 1) Paycheck 2) Business Income 7) Income from Investment Activities 3) Interest b) Interest c) Dividends 8) Life insurance proceeds 9) Gift from parents 10) Poker Business 3) Income b) Deductible Expenses c) Nondeductible Expenses 11) Weed Business a) Income b) Deductible Expenses c) Nondeductible Expenses 12) Short-Term Capital Gain from Sale of Common Stock Total Taxable Income 5 - Income: Gross Receipts Accounts Receivable Total Income Deductible Expenses: Purchase of Office Supplies Down Payment on Machine 3 Printer Payments Advertising Telephone and Utilities Copy Machine Payments Office Rent Liabilities and Property Insurance Routine Repairs Wages Paid Employer Payroll Taxes Business Meals Business Entertainment Estimated Federal Tax Payments Contribution to Political Campaign Contribution to NLP Occupational License Depreciation Total Deductible Total Business Income Amount Explanation A B C D E F G H I K L M N O P Q R S OUT A W N Client: Mary Varela Business Schedule: Property, plant and equipment Date: December 31, 2019 6 00 ~ Tax depreciation 2016 2017 2018 2019 deductions Adjusted Property Acquisition Date Cost Method Class MACRS MACRS MACRS Section 179 Bonus MACRS basis Machine # 1 2/1/16 40,000 MACRS 200% DB 7 Machine # 2 4/1/16 18,000 MACRS 200% DB 7 10 Office computer 8/1/16 10,000 MACRS 200% DB 5 11 Copying machine 4/1/17 40,000 MACRS 200% DB 5 12 Machine # 3 11/1/19 68,000 MACRS 200% DB 7 13 14 15 16 17 18 19 Additional notes: 20 Machine #1 was sold on March 16, 2019. 21 22Lease Option Year Macrs Tax Savings Depreciation (25%) Annual lease payment 0 Tax Savings (7500 * 25%) H After-tax annual payment 2 3 Present value of year 0 payment 4 Present value of years 1-4 payment 5 After-tax cost of rent option Total Year 0 2 W 4 5 Initial Payment Interest Cost Recovery Deductions Interest Deductions Net Cash Flow Discount Factor NPV Total NPV