Required: a. What amount of each of these expenses is allocated to the home office? b. What are the total amounts of tier 1, tier 2, and tier 3 expenses, respectively, allocated to the home office? 4 c. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction, and what home office expenses, if any, would she carry over to next year? e. Assume that Brooke uses the simplified method for computing home office expenses. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction, and what home office expenses, if any, would she carry over to next year? Note: Leave no answer blank. Enter zero if applicable..

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Question

Subject : Accounting

 

Brooke owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home
where she meets with clients, prepares bills, and performs other work-related tasks. The home office is 300 square feet,
and the entire house is 4,500 square feet. Brooke incurred the following home-related expenses during the year. Brooke
itemizes her 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. Unless indicated otherwise, assume Brooke uses the actual
expense method to compute home office expenses.
Real property taxes
Interest on home mortgage
Operating expenses of home
Depreciation
Repairs to home theater room
$ 3,600
14,000
5,000
12,000
1,000
Required:
a. What amount of each of these expenses is allocated to the home office?
b. What are the total amounts of tier 1, tier 2, and tier 3 expenses, respectively, allocated to the home office?
c. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home
office expense deduction, and what home office expenses, if any, would she carry over to next year?
e. Assume that Brooke uses the simplified method for computing home office expenses. If Brooke reported $2,000 of Schedule C
net income before the home office expense deduction, what is the amount of her home office expense deduction, and what home
office expenses, if any, would she carry over to next year?
Note: Leave no answer blank. Enter zero if applicable.
Transcribed Image Text:Brooke owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home where she meets with clients, prepares bills, and performs other work-related tasks. The home office is 300 square feet, and the entire house is 4,500 square feet. Brooke incurred the following home-related expenses during the year. Brooke itemizes her 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. Unless indicated otherwise, assume Brooke uses the actual expense method to compute home office expenses. Real property taxes Interest on home mortgage Operating expenses of home Depreciation Repairs to home theater room $ 3,600 14,000 5,000 12,000 1,000 Required: a. What amount of each of these expenses is allocated to the home office? b. What are the total amounts of tier 1, tier 2, and tier 3 expenses, respectively, allocated to the home office? c. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction, and what home office expenses, if any, would she carry over to next year? e. Assume that Brooke uses the simplified method for computing home office expenses. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction, and what home office expenses, if any, would she carry over to next year? Note: Leave no answer blank. Enter zero if applicable.
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C Required E
Assume that Brooke uses the simplified method for computing home office expenses. If Brooke reported $2,000 of Schedule C
net income before the home office expense deduction, what is the amount of her home office expense deduction, and what
home office expenses, if any, would she carry over to next year?
Note: Leave no answer blank. Enter zero if applicable.
Home office expenses deduction
Home office expenses carried forward
$ 2,306
$
306
Showless A
Transcribed Image Text:Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required E Assume that Brooke uses the simplified method for computing home office expenses. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction, and what home office expenses, if any, would she carry over to next year? Note: Leave no answer blank. Enter zero if applicable. Home office expenses deduction Home office expenses carried forward $ 2,306 $ 306 Showless A
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