Question

Edna Kropp's gross income for a year included salary, $12,400; commission, $27,750; interest, $440. Her adjustments to income were payments to a retirement plan, $2,000, and a penalty for withdrawing savings early from a time-deposit account, $126.

a. What was her gross income for the year?
b. Find her adjusted gross income for the year.

Answer 1

Edna Kropp's gross income for the year is $40,590. After subtracting the adjustments for retirement plan contributions and penalty for early withdrawal, her adjusted gross income is $38,464.

Step-by-step explanation:

To calculate the gross income for Edna Kropp, we add up all her income sources, including her salary, commission, and interest:

• Salary: $12,400
• Commission: $27,750
• Interest: $440

Therefore, Edna's gross income for the year is $12,400 + $27,750 + $440 = $40,590.

To find the adjusted gross income (AGI), we subtract her adjustments to income from her gross income. Edna's adjustments include contributions to a retirement plan and a penalty:

• Payments to a retirement plan: $2,000
• Penalty for early withdrawal: $126

Therefore, her AGI can be calculated as follows:
Gross Income - Adjustments = $40,590 - ($2,000 + $126) = $40,590 - $2,126 = $38,464.