Brady Owns a Second Home That He Rents to Others

question 58

Multiple Choice

Brady owns a second home that he rents to others. During the year, he used the second home for 50 days for personal use and for 100 days for rental use. Brady collected$20,000 of rental receipts during the year. Brady allocated $7,000 of interest expense and property taxes, $10,000 of other expenses, and $4,000 of depreciation expense to therental use. What is Brady's net income from the property and what type and amount of expenses will he carry forward to next year, if any?

• A) $0 net income. $1,000 depreciation expense carried forward to next year.
• B) ($1,000) net loss. $0 expenses carried over to next year.
• C) $0 net income. $1,000 of interest expense and property taxes carried over to next year.
• D) $0 net income. $1,000 of other expense carried over to next year.

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Definitions:

Financial Control

The management of an organization's revenues, expenses, and assets to improve financial efficiency and effectiveness.

Small Business Failure Rates

The percentage of small businesses that do not succeed or cease operations within a certain period of time.

First Five Years

A period often referencing the early stage of an entity's existence, crucial for development and long-term success.

Operation

A series of actions or steps taken to achieve a particular end.