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 as shown in Table 6.2 in your textbook. Clearly indicate the amount of your potential over/understatement income.