Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessie's income is $837. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income: Joe's salary $ 134,700 Jessie's craft sales 18,460 Interest from certificate of deposit 1,710 Interest from Treasury bond funds 728 Interest from municipal bond funds 932 Expenditures: Federal income tax withheld from Joe's wages $ 13,700 State income tax withheld from Joe's wages 6,520 Social Security tax withheld from Joe's wages 7,506 Real estate taxes on residence 6,320 Automobile licenses (based on weight) 322 State sales tax paid 1,210 Home mortgage interest 16,600 Interest on Masterdebt credit card 2,420 Medical expenses (unreimbursed) 1,750 Joe's employee expenses (unreimbursed) 2,520 Cost of Jessie's craft supplies 4,920 Postage for mailing crafts 151 Travel and lodging for craft shows 2,290 Self-employment tax on Jessie's craft income 1,674 College tuition paid for Lizzie 5,900 Interest on loans to pay Lizzie's tuition 3,320 Lizzie's room and board at college 12,740 Cash contributions to the Red Cross 555 a. Determine Joe and Jessie's AGI and taxable income for the year.

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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Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000).

Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessie's income is $837. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:

Income:
Joe's salary	$ 134,700
Jessie's craft sales	18,460
Interest from certificate of deposit	1,710
Interest from Treasury bond funds	728
Interest from municipal bond funds	932
Expenditures:
Federal income tax withheld from Joe's wages	$ 13,700
State income tax withheld from Joe's wages	6,520
Social Security tax withheld from Joe's wages	7,506
Real estate taxes on residence	6,320
Automobile licenses (based on weight)	322
State sales tax paid	1,210
Home mortgage interest	16,600
Interest on Masterdebt credit card	2,420
Medical expenses (unreimbursed)	1,750
Joe's employee expenses (unreimbursed)	2,520
Cost of Jessie's craft supplies	4,920
Postage for mailing crafts	151
Travel and lodging for craft shows	2,290
Self-employment tax on Jessie's craft income	1,674
College tuition paid for Lizzie	5,900
Interest on loans to pay Lizzie's tuition	3,320
Lizzie's room and board at college	12,740
Cash contributions to the Red Cross	555

a. Determine Joe and Jessie's AGI and taxable income for the year.

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