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Bess [88]
3 years ago
15

In year 1, Kris purchased a new home for $200,000 by making a down payment of $150,000 and financing the remaining $50,000 with

a loan, secured by the residence, at 6 percent. As of January 1, year 4, the outstanding balance on the loan was $40,000. On January 1, year 4, when his home was worth $300,000, Kris refinanced the home by taking out a $150,000 mortgage at 5 percent. With the loan proceeds, he paid off the $40,000 balance of the existing mortgage and used the remainder for purposes unrelated to the home. During year 4, he made interest only payments on the new loan of $7,500. What amount of the $7,500 interest expense on the new loan can Kris deduct in year 4 on the new mortgage as home related interest expense?
a. $2,000
b. $5,000
c. $7,000
d. $7,500
Business
1 answer:
blondinia [14]3 years ago
4 0

Answer: D. $7,500

Explanation:

Before the $150,000 mortgage at 5%, the existing $40,000 balance of the loan was paid off. Therefore, only the mortgage was payable. At 5% x %150,000 = $7500 interest.

Therefore, the amount $7500 interest expense Kris will deduct as home related interest expense would be $7,500.

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On June 1, 2022, Elite Service Co. was started with an initial investment in the company of $22,100 cash. Here are the assets, l
Helen [10]

Question Completion:

Cash                         $ 4,600

Accounts receivable   4,000

Supplies                      2,400  

Equipment               26,000

Total assets          $37,000

Notes payable       $12,000

Accounts payable        500

Service revenue       7,500

Supplies expense    1,000  

Maintenance and repairs expense  600

Advertising expense  400  

Utilities expense  300

Salaries and wages expense  1,400

Common stock  22,100

In June, the company issues no additional stock but paid dividends of $1,400.

Prepare an income statement, retained earnings statement, and balance sheet.

Check figures:

·         Net income is $3,800.

·         Total assets are $37,000.

·         Total liabilities are $12,500.

Answer:

Elite Service Co.

a) Income Statement for the month of June 30, 2022:

Service revenue                                         $7,500

Supplies expense                           $1,000  

Maintenance and repairs expense    600

Advertising expense                          400  

Utilities expense                                300

Salaries and wages expense         1,400   3,700

Net Income                                              $3,800

b) Retained Earnings Statement for the month of June 30, 2022:

Net Income                     $3,800

Dividends paid                  1,400

Retained Earnings         $2,400

c) Balance Sheet as of June 30, 2022:

Cash                                   $ 4,600

Accounts receivable             4,000

Supplies                                2,400  

Equipment                         26,000

Total assets                    $37,000

Notes payable                 $12,000

Accounts payable                  500

Total liabilities                $12,500

Common stock                 22,100

Retained Earnings          $2,400

Total liabilities + Equity $37,000

Explanation:

Data and Calculations:

Cash                         $ 4,600

Accounts receivable   4,000

Supplies                      2,400  

Equipment               26,000

Total assets          $37,000

Notes payable       $12,000

Accounts payable        500

Common stock       22,100

3 0
2 years ago
Luis consulting started the year with total assets of $60,000 and total liabilities of $17,000. during the year, the business re
BARSIC [14]
Owner's equity at the beginning of the year is
Assets-liabilities
60,000−17,000=43,000

Owner's equity at the end of the year is
Beginning balance+revenues-expenses+additional investment-withdrawal amount
43,000+48,000−36,000
+8,000−9,000
=54,000

Owner's equity changed by
ending balance-beginning balance
54,000−43,000=11,000. ..answer
6 0
3 years ago
Two brothers each open IRAs in 2009 and plan to invest $3,000 per year for the next 30 years. John makes his first deposit on Ja
Goryan [66]

Answer:

Future value of John's investment

FV = A<u>(1+r)n+1 - (1+r) </u>

                   r

Fv = $3,000<u>((1 + 0.07)30+1 - (1 +0.07))</u>

                           0.07

FV = $3,000<u>((1.07)31 - (1.07)</u>

                            0.07

FV = $3,000 x 101.0730414

FV = $303,219

Future value of Bill's investment

FV = A<u>((1 + r)n - 1)</u>

                r

FV = $3,000 <u>((1 + 0.07)</u>30 - 1)

                          0.07

FV = $3,000<u>((1.07)30 - 1) </u>

                        0.07

FV = $3,000 x 94.46078632

FV = $283,382

The difference in the value of IRAs

= $303,219 - $283,382

= $19,837

The correct answer is A

Explanation:

In the first case, we need to apply future value of annuity due formula since deposits are made at the beginning of each year.

In the second case, we need to apply future value of an ordinary annuity formula since deposits are made at the end of each year.

6 0
3 years ago
What was the only thing Amazon sold when it first opened 25 years ago
Kisachek [45]
Amazon was originally an online bookstore
6 0
2 years ago
Read 2 more answers
Elite Couture, a high-end fashion goods store has to decide on the quantity of Luella Bartley handbags to sell during the Christ
adelina 88 [10]

Answer:

170 bags should be purchased to maximum expected profi!

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