A senior tax partner in your office has requested that you meet with Mr. Jehangir Dauwalla, a new client, to assist in preparing his personal income tax return. During your initial client meeting, you obtained the following information about Mr. Dauwalla's new business, which he started on June 1. The proprietorship provides hot air balloon rides and weekend leisure trips. His accounting is prepared on the cash basis.
Up and Away Cash Flow Statement from
Proprietorship June 1 to December 31

Notes:
(a) Payments received from customers in January for all December flights and outstanding accounts receivable total $4,650 and are not included above.
(b) Advertising includes $462 of meals and entertainment expenses relating to promoting business with clients.
(c) Licences expense includes $460 for golf memberships for Jehangir and his spouse. He has met several potential new customers through the club and feels that this cost should be deductible. The remaining amount was for business licensing.
(d) In September, Jehangir won a new car through a minor hockey association ticket raffle. The prize had an estimated fair market value of $12,500.
REQUIRED
Compute Jehangir's income from a business for tax purposes.

Cash receipts (Note a) Cash disbursements $27,220 Advertising (Note b) Charitable donations Equipment rental Liability insurance Licences (Note c) Salary paid to Jehangir Supplies Telephonengdistance $ 2,200 380 3,450 2,860 680 14,750 3,870 610 (28,800) ($1,580) Cash outflow