Wilhelmina operates a daycare center in her home as a sole proprietorship.She has gross revenues of $15,000 and the following expenses: Cost of food $1,200;allocated costs of using the home $900;allowable depreciation $500;reasonable salary for her 16 year old daughter for after-school help $3,000.
A)Determine Wilhelmina's net income from the sole proprietorship in 2013.
B)Determine Wilhelmina's total of self-employment and income taxes if her marginal tax rate is 25 percent.

Question

Quizplus · Accepted Answer

Wilhelmina's net income is calculated by subtracting her expenses from her gross revenues. Her expenses are $1,200 (food) + $900 (home costs) + $500 (depreciation) + $3,000 (salary) = $5,600. Therefore, her net income is $15,000 - $5,600 = $9,400.

Wilhelmina Operates a Daycare Center in Her Home as a Sole