Dianne started her daycare business on January 1, 2020; it is open five days a week from 8:30 AM to 5:30 PM all year. (Use 260 days for the year.) Dianne was required to purchase an additional homeowner's insurance rider, to cover the operation of a business in the home. She uses the cash method of accounting.

Their home is valued at $270,200, which includes the land value of $20,000. The total area of the house is 2,000 square feet, and she uses the whole house for the daycare.

Gross receipts for daycare business: $13,600 

Expenses:

Electricity $2,270 

Toys $475

Advertising $82 

Water $448

Homeowner's insurance (rider) $509

Real estate tax $1,675
Business license $100

Homeowner's insurance $1,535

CPR class $600

Mortgage interest $7276
Repairs to home (damage by child) $275

Meals for the children $5,050
Paint entire house (inside & out) $4,245

 Personal draw (Dianne) $5,000

Answer the following question based on the tax return you prepared for Donald and Dianne Duncan:

Select the amount of daycare business net profit/loss:

a) $2,660 

b) $1,848 

c) $ 135 

d) $ 735