Grade for Jennifer Lewis: Week 1 Quiz
Jennifer, Thank you for a wonderful attempt on your first quiz of the semester. I would
like you to review the quiz for reference on the mid-term exam. For next week’s quiz,
you will receive a review on Tuesday evening and problems will be worked in the
discussion. Also, you can ask any questions on the homework in the Discussion Forum. If
you have any questions, please feel free to e-mail me.
These are the automatically computed
results of your exam. Grades for essay
questions, and comments from your
instructor, are in the "Details" section
(TCO 2) Mac is the owner of Maid in Arizona Cleaning Service (MACS). This
year, the company had gross income of $300,000 and operating expenses of
$195,000. In July, MACS sold a capital asset that had been held by the
business for two years for a $15,000 loss. During the year, Mac withdrew
$93,000 from the business for his personal living expenses. Assuming MACS
is a sole proprietorship, how do these transactions affect Mac’s taxable
income for the year?
Increase taxable income by $105,000.
Increase taxable income by $102,000.
Increase taxable income by $93,000.
Increase taxable income by $90,000.
None of the above
Mac reports the income and expenses of the business on Schedule C,
resulting in net profit (ordinary income) of $105,000 ($300,000 – $195,000).
He reports all of the $105,000 net profit from the business on Form 1040,
where he computes taxable income for the year. The $93,000 that Mac
withdrew from the business has no impact on his taxable income. He also
reports a $15,000 LTCL on Schedule D of his Form 1040, but his deduction is
limited to $3,000. The remaining LTCL of $12,000 ($15,000 – $3,000) may be
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