The brock's business, westchester wood, has the following income and expenses:
1) Assume Westchester Wood is a business... A) Identify which expenditures are ordinary, necessary, and reasonable. B) Whether the expenditures should be capitalized or expensed. C) Calculate net income or loss.
Assume that Westchester Wood is a hobby:
A) Identify Expenditures (ignore any that would be capitalized) that are allowed and to what extent.
B) Identify which expenditures are tier 1, tier 2, or tier 3 expenses.
Income:
- Receipts from sales of unfinished furniture $65,000
- Receipts from services to stain/paint furniture 12,000
- Receipts from sales of paint and stain products 1,000
Expenditures:
- Cost of furniture$38,000
- Cost of stains and paints 2,500
- Depreciation expense on building 7,000
- Advertising 1,200
- Auto expenses (delivering furniture) 900
- Loading dock (new) 22,000
- Utilities 6,000
- Insurance 3,500
- Labor (to stain/paint furniture) 9,800
- Property taxes 5,000
- Delivery truck (used truck) 9,500
- Bank fees 2,000
- Telephone 2,500
- Computer 1,300
- Meals and entertainment 1,800
- Accounting 6,000
- Landscaping 2,400
- Maintenance 1,200
The amount for landscaping includes 800 for maintaining the brock's personal residence. The utilities include 2000 of oil that was delivered to the brock's home.