In 2017, Mario Earned $9,000 in Net Investment Income and Incurred

question 178

Multiple Choice

In 2017, Mario earned $9,000 in net investment income and incurred $14,000 of investment interest expense. Mario paid off the loan in early 2018, so he only paid $2,000 of investment interest expense in 2018. He earned $10,000 of net investment income in 2018. How much investment interest expense can Mario deduct in 2018?

• A) $0
• B) $2,000
• C) $10,000
• D) $7,000

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Definitions:

Merchandise

Goods bought for resale in the course of business, typically in a retail or wholesale establishment.

Payments

The act of transferring money in exchange for goods or services, or to settle debts.

Inventory System

A mechanism for tracking and managing items that a company holds in stock, covering aspects like ordering, storing, using, and selling these goods.

Perpetual

Continuing indefinitely without a predetermined end in the context of perpetual inventory systems that continually update to reflect buying and selling activities.