Dianne started her daycare business on January 1, 2017; it is open five days a week...

Dianne started her daycare business on January 1, 2017; it is open five days a week from 8:30 AM to 5:30 PM all year. (Use 260 days for the year.) Dianne was required to purchase additional insurance, a rider, due to operating a business in the home. Their home is valued at $270,200, which includes the land value of $20,000. The total area of the house is 2,000 square feet, and she uses the whole house for the daycare.

Gross receipts for daycare business: $13,600

Expenses: Electricity $2,270 Advertising $82 Toys $475 Water $448 Home insurance (rider) $509 Mortgage interest $7,276 Real estate tax $1,675 Repairs to home (damage by child) $275 Business license $100 Meals for the children $5,050 Homeowners insurance $1535 Paint entire house (inside & out) $4,245 CPR class $600 Personal draw (Dianne) $5,000

Select the amount daycare business net profit/loss:

A) $2,660

B) $1,848

C) $ 135

D) $ 735

Solutions

Expert Solution

By using standard method:

No. Hours in a day used for day care facility = 9 hours

Total No. of days used in the year = 260

Total hours of usage = 2340

Total hours in 2017 = 365*24 = 8760

Percentage of busines usage = 2340/8760 = say 26.72%

Direct Expenses to the business (Deductible 100%)

Advertising 82

Repairs 275

Business Licence 100

CPR class 600

Toys 475

Children meals 5050

Rider 509

Total 7091

Indirect Expenses:

Electricity	2270	26.70%	606
Water	448	26.70%	120
Mortagage Interest	7276	26.70%	1943
Real Estate Tax	1675	26.70%	447
Home owners insurance	1535	26.70%	410
Paint	4245	26.70%	1133
Depreciation	9098	26.70%	2429
TOTAL			7088

Total Expenses = 7091+7088 = 14179 Gross Receipts = 13600Difference 579

Answer is d loss of 735 as it is nearest

ekkarill92 answered 1 year ago

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