The following information came from an IRS audit of a sole proprietor named John Doe. All of the items shown in the information below are cash (receipts or payments) unless otherwise indicated.
Using the “Cash T” approach, compute the probable over/understatement of income as would be determined by the IRS agent.
Schedule C Gross receipts $112,610 Schedule C Purchases 65,414 Schedule C Expenses (net of depreciation) 30,023 Rental income 5,318 Rental expenses (net of depreciation) 6,330 Beginning bank account balance 7,873 Ending bank account balance 17,265 Insurance proceeds received (taxable) 4,300 Principal payments on rental property loan… 2,894 Personal & household expenses 26,550 Auto expenses (personal autos) 9,788 Social security benefits received 6,500 Gifts of cash received from relatives 2,000 IRA (retirement account) contributions 5,000
The bank account balances have already been reconciled to the bank statements.
Show your complete computations in the Final Cash-T format
Sample Solution
