c. What types and amounts of expenses will she carry over to next year? Note: Leave no answer blank. Enter zero if applicable. Tier 1 expenses carried over to next year Tier 2 expenses carried over to next year Tier 3 expenses carried over to next year Amount

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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**Required Information**

*[The following information applies to the questions displayed below.]*

Rita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,600. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses:

- **Real property taxes:** $1,600
- **Interest on home mortgage:** $5,100
- **Operating expenses of home:** $800
- **Depreciation:** $1,600

Also, assume that, not counting the sole proprietorship, Rita's AGI (Adjusted Gross Income) is $60,000. Rita itemizes deductions, and her itemized deduction for non-home business taxes is less than $10,000 by more than the real property taxes allocated to business use of the home.

Assume Rita's consulting business generated $13,000 in gross income for the current year. Further, assume Rita uses the actual expense method for computing her home office expense deduction.

---

**c. What types and amounts of expenses will she carry over to next year?**

*Note: Leave no answer blank. Enter zero if applicable.*

|                | Amount                 |
|----------------|------------------------|
| Tier 1 expenses carried over to next year |                        |
| Tier 2 expenses carried over to next year |                        |
| Tier 3 expenses carried over to next year |                        |
Transcribed Image Text:**Required Information** *[The following information applies to the questions displayed below.]* Rita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,600. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses: - **Real property taxes:** $1,600 - **Interest on home mortgage:** $5,100 - **Operating expenses of home:** $800 - **Depreciation:** $1,600 Also, assume that, not counting the sole proprietorship, Rita's AGI (Adjusted Gross Income) is $60,000. Rita itemizes deductions, and her itemized deduction for non-home business taxes is less than $10,000 by more than the real property taxes allocated to business use of the home. Assume Rita's consulting business generated $13,000 in gross income for the current year. Further, assume Rita uses the actual expense method for computing her home office expense deduction. --- **c. What types and amounts of expenses will she carry over to next year?** *Note: Leave no answer blank. Enter zero if applicable.* | | Amount | |----------------|------------------------| | Tier 1 expenses carried over to next year | | | Tier 2 expenses carried over to next year | | | Tier 3 expenses carried over to next year | |
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