William, a cash-basis sole proprietor, had the following receipts and disbursements for the current year: $$\begin{array} { l r }
\text { Gross receipts } & \$ 50,000 \
\text { Cost of sal es } & 30,000 \
\text { Other operating expenses } & 5,000 \
\text { Personal medical expenses } & 600
\end{array}$$ For the current year, what amount should William report as net earnings from self-employment?

Question

William, a cash-basis sole proprietor, had the following receipts and disbursements for the current year: $$\begin{array} { l r } 
\text { Gross receipts } & \$ 50,000 \
\text { Cost of sal es } & 30,000 \
\text { Other operating expenses } & 5,000 \
\text { Personal medical expenses } & 600
\end{array}$$ For the current year, what amount should William report as net earnings from self-employment?

Quizplus · Accepted Answer

Net earnings from self-employment are calculated as gross receipts minus cost of sales and other operating expenses. Personal medical expenses are not deductible for self-employment income. Therefore, $50,000 - $30,000 - $5,000 = $15,000.

William, a Cash-Basis Sole Proprietor, Had the Following Receipts and Disbursements