Bezone Corp.is being alleged of tax fraud for the financial year 2015-2016.The ending net worth for the period was $2.285m and beginning net worth was $1.595m.Expenditures (consumption)during the period amounted to $0.725m.The reported income in Bezone's tax return amounted to $0.69.Other legitimate sources of funds in the tax return reported an income of $0.31.Calculate the inferred unreported income using the net worth method of indirect proof.

Question

Quizplus · Accepted Answer

Using the net worth method, we can calculate the inferred unreported income as follows:
Ending net worth - Beginning net worth - Expenditures - Reported income + Legitimate sources of funds
= $2.285m - $1.595m - $0.725m - $0.69m + $0.31m
= $0.415m

Therefore, the inferred unreported income is $0.415m, which is choice C.