Talia Finn is working as an analyst for the Drug Enforcement Agency (DEA) and has been assigned to a case in which the suspect is believed to be engaged in a rather large drug-dealing operation behind the sham business Nutritional Supplements. Her first assignment is to perform a net worth method on Clyde Barrow., the sole proprietor of the unincorporated business.

Talia prepared a net worth method using the information she had collected that follows.

	Year 1	Year 2	Year 3
Assets
Cash on hand	$ 500	$ 750	$ 900
Cash in bank	3,000	12,500	15,000
Vehicles	30,000	90,000	120,000
Real property: Store		250,000	250,000
Real property: Homes		350,000	575,000
Total assets	$33,500	$703,250	$960,900
Liabilities
Vehicle loans	$20,000	$ 70,000	$ 85,000
Mortgages		290,000	450,000
Total liabilities	$20,000	$360,000	$535,000
Income
Income from business		$ 85,000	$ 97,000
Total income		$ 85,000	$ 97,000

Financial Information for Clyde Barrow

Expenditures
Vehicle payments	$15,000	$ 15,000
Mortgage payments	55,000	190,000
Additional living expenses	100,000	135,000
Total expenditures	$170,000	$340,000

After Talia completed her analysis, she concluded that there was undisclosed income for both years 2 and 3 and wanted an explanation. Talia asked to meet with Clyde again, and at that meeting Clyde told her that he believes that the cash on hand amounts that were used in the projection were too low. Although he had provided the amount to her earlier, he now believes that it was much higher than the amounts used and seems to recall that he had about $200,000 stashed away in case the economy crashed. When Talia asked him about the source of the $200,000, Clyde shrugged and said, Part of it was an inheritance from my dear old Aunt Hattie, and the balance was just some money I had saved.

Required:

a. Complete the necessary calculations to calculate the Income from undisclosed sources.

b. How should Talia respond to this new information (i.e., would she want additional information from Clyde), and what are the sources of evidence that she needs to follow up on his assertion? What will be Income from unknown sources for Clyde? What follow up questions should she ask Clyde about the $200,000?