2020 Enterprises,owned by Xio Who Also Manages the Businesses,has Generated

question 12

Multiple Choice

2020 Enterprises,owned by Xio who also manages the businesses,has generated more than $30 million of sales for each of the past five years.This year it is reporting the following income and deduction amounts: $$\begin{array} { | l | r | } \hline \text { Sales } & \$ 35,000,000 \\\hline \text { Cost of goods sold } & ( 22,000,000 ) \\\hline \text { Other operating expenses } & ( 8,000,000 ) \\\hline \text { Depreciation } & ( 2,000,000 ) \\\hline \text { Preliminary taxable income } & \$ 3,000,000 \\\hline\end{array}$$ Xio just received a statement from the bank reporting interest expense of $1,800,000 on a loan to 2020 Enterprises to fund operations and equipment purchases.How much of the interest expense can 2020 Enterprises deduct in computing this year's taxable income?

• A)$540,000
• B)$900,000
• C)$1,500,000
• D)$1,800,000