Reference no: EM13597032

The brock's business, westchester wood, has the following income and expenses:
1) Assume Westchester Wood is a business... A) Identify which expenditures are ordinary, necessary, and reasonable. B) Whether the expenditures should be capitalized or expensed. C) Calculate net income or loss.

Assume that Westchester Wood is a hobby:
A) Identify Expenditures (ignore any that would be capitalized) that are allowed and to what extent.
B) Identify which expenditures are tier 1, tier 2, or tier 3 expenses.

Income:

• Receipts from sales of unfinished furniture $65,000
• Receipts from services to stain/paint furniture 12,000
• Receipts from sales of paint and stain products 1,000

Expenditures:

• Cost of furniture$38,000
• Cost of stains and paints 2,500
• Depreciation expense on building 7,000
• Advertising 1,200
• Auto expenses (delivering furniture) 900
• Loading dock (new) 22,000
• Utilities 6,000
• Insurance 3,500
• Labor (to stain/paint furniture) 9,800
• Property taxes 5,000
• Delivery truck (used truck) 9,500
• Bank fees 2,000
• Telephone 2,500
• Computer 1,300
• Meals and entertainment 1,800
• Accounting 6,000
• Landscaping 2,400
• Maintenance 1,200

The amount for landscaping includes 800 for maintaining the brock's personal residence. The utilities include 2000 of oil that was delivered to the brock's home.