41. Apartment building manager reports revenue of $1,350 per month. He was 100% occupied for the...

41. Apartment building manager reports revenue of $1,350 per month. He was 100% occupied for the year. He pays $70 per month for water & trash for the complex. His insurance was $1,050 for the year. His payment on the building were $8,400 for the year. $4,815 of it was interest. He was $50 in advertising expense for the year. Maintenance totaled for year totaled $925. He will be depreciating the property $2,320 for the year. He is also depreciating a Heat & Air unit at $815 for the year, which he bought and installed this year for the cost of $5,000. He has $5,300 in his business bank account and is holding deposits of $1,300 in escrow. The land is valued at $20,000. The building is valued at 116,000 with the land. Total depreciation on the building has been $25,000. He owns the local printer $65; the plumber, $420 and the local paper $50. He owes $73,500 on the property. Property taxes for the year are $1,725. The owner paid income tax of $12,500 this year.

The bottom line Annual Profit or Loss is

(A) Profit of $1,350.00 (B) Loss of $1,350.00 (C)Profit of $3,660.00 (D) None of the above

Expert Solution

The answer to above is $3,660 profit.

Please find attached image for detailed calaculation.

Notes-

Income tax paid is not expense it is tax on income earned however to balance accounting equation entry for income tax is being done in businesses.
Income tax has not been deducted as tax on 3660 cannot be 12,500 in any country, it seems owner's personal liability of tax hence not been deducted from profits.
The property tax is not recoverable hence expensed as expense.
Local printer, plumbers payments seems as prepaid expenses because owners owns it means ownership of owner.

please comment for any additonal explanation.

Thanks,

ekkarill92 answered 2 years ago

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