John and Jessica are married and have one dependent child, Liz.Liz is currently in college at State University. John works as adesign engineer for a manufacturing firm while Jessie runs a craftbusiness from their home. Jessica’s craft business consists ofmaking craft items for sale at craft shows that are heldperiodically at various locations. Jessica spends considerable timeand effort on her craft business and it has been consistentlyprofitable over the years. John and Jessica own a home and payinterest on their home loan (balance of $220,000) and a personalloan to pay for Lizzie’s college expenses (balance of $35,000).

Neither John and Jessica is blind or over age 65, and they planto file as married-joint. Based on their estimates, determine Johnand Jessica’s AGI and taxable income for the year and completepages 1 and 2 of Form 1040 (through taxable income, line 43) andSchedule A. Assume that the employer portion of the self-employmenttax on Jessie’s income is $808. Joe and Jessie have summarized theincome and expenses they expect to report this year as follows:

Income:
?Your salary	$119,100
?Spouse's craft sales	18,400
?Interest from certificate of deposit	1,650
?Interest from Treasury bond funds	727
?Interest from municipal bond funds	920
Expenditures:
?Federal income tax withheld from your wages	$13,700
?State income tax withheld from your wages	6,400
?Social Security tax withheld from your wages	7,482
?Real estate taxes on residence	6,200
?Automobile licenses (based on weight)	310
?State sales tax paid	1,150
?Home mortgage interest	14,000
?Interest on Masterdebt credit card	2,300
?Medical expenses (unreimbursed)	1,690
?Your employee expenses (unreimbursed)	2,400
?Cost of Spouse's craft supplies	4,260
?Postage for mailing crafts	145
?Travel and lodging for craft shows	2,230
?Meals during craft shows	670
?Self-employment tax on Spouse's craft income	1,615
?College tuition paid for your child	5,780
?Interest on loans to pay your child's tuition	3,200
?Your child's room and board at college	12,620
?Cash contributions to the Red Cross	525