Elise Is a Self-Employed Business Consultant Who Operates Her Business

question 155

Multiple Choice

Elise is a self-employed business consultant who operates her business out of an office in her home. The home office passes the qualifying tests for deducting office in the home expenses. For the current tax year, Elise earns $90,000 from her business activities. She incurs $82,000 in supplies, travel expenses, wage expense, etc. Elise's mortgage interest and real estate taxes allocable to the home office space were determined to be $9,000. Also, other expenses including insurance, repairs and maintenance, utilities, and depreciation allocable to the home office space total $11,000. How much of the other expenses (insurance, repairs, etc.) can Elise deduct?

• A)$- 0 -
• B)$2,000
• C)$8,000
• D)$9,000
• E)$11,000

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Definitions:

Effective Income Tax Rate

This rate is the average percentage that companies or individuals pay in taxes on their taxable income.

U.S. Statutory Income Tax Rate

This refers to the prescribed rate at which income is taxed by the U.S. government, set by law for corporations and individuals.

Installment Method

A revenue recognition method allowing companies to recognize revenue and expense in proportion to the cash received from sales, typically used when sales are made with terms allowing payment over more than one year.

Percentage-of-completion Method

An accounting method that recognizes revenue and expenses related to long-term projects proportionally as the work is completed.