Karen is a dentist who runs her own practice. Karen employs another qualified dentist, James, two full time dental assistants and one full time receptionist/secretary. Although the majority of the patients who attend the practice are seen by Karen, James performs work independently of Karen and the income James and the other staff generates is significant. The equipment Karen owns and uses in her business includes expensive and specialised dental chairs, drills and an X-ray machine. While Karen requests patients pay at the time of each consultation, she regularly allows credit to patients and sends a reminder of the amount outstanding where necessary. In the current tax year ended 30 June Karens practice received professional fees of $330 000. She had $35 000 owing from debtors on 30 June of the previous tax year and $45 000 owing on 30 June of the current tax year. The practice paid a total of $150 000 in wages to James and the other staff during the current tax year ended 30 June. What amount of income will be derived by the practice in the current tax year ended 30 June?

Select one:

1. $375 000.

2. $330 000.

3. $365 000.

4. $340 000.

5. $150 000.