Dennis is a self-employed hair stylist who operates a salon in his home. The property taxes and interest allocated to the business amount to $5,000, maintenance and utilities allocated to the business total $2,100, and depreciation allocated to the business use of the home equals $3,100 for the current tax year. a.If Dennis' gross revenue after deducting supplies for his business is $5,900 for the current tax year, calculate his allowable deductions for the home office. b.If Dennis' gross revenue after deducting supplies for his business is $13,800, calculate his allowable deductions for the home office.

Concept used: Denis has Allowable deduction on the following: Taxes and interest Maintenance & utilities Depreciation a) Out of $5,900, the amount of $5,000 will be for taxes and interests and remaining $900 will be for maintenance and utilities. No depreciation expense will be deducted from the current year. Thus, the total of $5,900 will be the allowable deduction for home office.b) Calculate allowable deduction as follow: Out of $13,800, only $10,200 is allowable deduction

Answered: Dennis is a self-employed hair stylist…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dennis is a self-employed hair stylist who operates a salon in his home. The property taxes and interest allocated to the business amount to $5,000, maintenance and utilities allocated to the business total $2,100, and depreciation allocated to the business use of the home equals $3,100 for the current tax year.

a.	If Dennis' gross revenue after deducting supplies for his business is $5,900 for the current tax year, calculate his allowable deductions for the home office.



b.	If Dennis' gross revenue after deducting supplies for his business is $13,800, calculate his allowable deductions for the home office.

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