Riva Borrows $10,000 That She Intends to Use for Purchasing

question 1775

Multiple Choice

Riva borrows $10,000 that she intends to use for purchasing supplies for her business. She temporarily deposits the funds in her personal checking account. Prior to the deposit, the checking account held $40,000 of personal funds. Riva books a vacation for $6,000 and writes a check to the travel agency from her personal account. Later in the month, the business supplies bill arrives and Riva writes a check for $10,000 from the personal account. With respect to the interest expense on the $10,000 loan,

• A) 20 percent will be treated as trade or business expense.
• B) it will all be treated as personal expense.
• C) 60 percent will be treated as personal interest expense and 40 percent as trade or business expense.
• D) it will all be treated as trade or business expense.

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Definitions:

Factors Of Production

The inputs or resources that are used in the production of goods and services, traditionally categorized as land, labor, capital, and entrepreneurship.

Input

The resources, materials, or data put into a system, process, or machine to obtain a desired output.

Output

The amount of something produced by a person, machine, or industry.

Function

A mathematical relation in which each element of a domain is associated with exactly one element of a range.