Provide a narrative explanation of how it will help prove embezzlement. Explain how Becky will attempt to refute these arguments Notes: Hello I have atta

PART 2. The purpose of this question is to demonstrate how a net worth analysis, a technique used by both the IRS and the Department of Justice, can show that there is income from unknown sources. a. Using the information in Table 1, prepare a net worth analysis using the indirect approach to calculate Becky’s income from unknown sources for years 2 and 3. b. Provide a narrative explanation of how it will help prove embezzlement. Explain how Becky will attempt to refute these arguments

Year 2 Analysis

1. Net Worth Change:

· Net worth at the end of Year 2:  $162,000

· Net worth at the end of Year 1:  $106,000

· Increase in net worth: $162,000 – $106,000 =  $56,000

2. Add Known Sources of Income:

· Salary: $35,000

· Other known income: $5,000

· Total known income: $35,000 + $5,000 =  $40,000

3. Subtract Known Expenditures:

· Living expenses: $20,000

· Federal taxes: $6,000

· Life insurance: $4,800

· Total known expenditures: $20,000 + $6,000 + $4,800 =  $30,800

4. Calculate Income from Unknown Sources:

Income from unknown sources= Net worth increase+Known Expenditures−Known incomeIncome from unknown sources

56,000+30,800−40,000=46,800

So, for  Year 2, the  income from unknown sources is  $46,800.

Year 3 Analysis

1. Net Worth Change:

· Net worth at the end of Year 3:  $305,000

· Net worth at the end of Year 2:  $162,000

· Increase in net worth: $305,000 – $162,000 =  $143,000

2. Add Known Sources of Income:

· Salary: $35,000

· Other known income: $62,000

· Total known income: $35,000 + $62,000 =  $97,000

3. Subtract Known Expenditures:

· Living expenses: $22,000

· Federal taxes: $6,000

· Life insurance: $4,800

· Addition to residence: $125,000

· Total known expenditures: $22,000 + $6,000 + $4,800 + $125,000 =  $157,800

4. Calculate Income from Unknown Sources:

Income from unknown sources=Net worth increase+Known Expenditures−Known incomeIncome from unknown sources

143,000+157,800−97,000=203,800

So, for  Year 3, the  income from unknown sources is  $203,800.

Summary of Income from Unknown Sources:

· Year 2: $46,800

· Year 3: $203,800

These unknown sources of income represent the additional amounts required to justify the observed increase in net worth.

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Table 1 – Information for Preparation of Net Worth Analysis

Provide a narrative explanation of how it will help prove embezzlement. Explain how Becky will attempt to refute these arguments Notes: Hello I have atta first appeared on College Essays Cafe.