Your Brother's Business Obtained a 30-Year Amortized Mortgage Loan for $300,000

question 153

Multiple Choice

Your brother's business obtained a 30-year amortized mortgage loan for $300,000 at a nominal annual rate of 7.0%,with 360 end-of-month payments.The firm can deduct the interest paid for tax purposes.What will the interest tax deduction be for Year 1?

• A) $18,813.11
• B) $24,248.01
• C) $20,903.46
• D) $20,485.39
• E) $19,440.22

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Definitions:

Direct Material Cost

The expense of basic materials and parts directly utilized in manufacturing a product.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they are incurred, such as selling, general, and administrative expenses.

Opportunity Cost

The cost of forgone alternatives when one option is chosen over another.

Administrative Expense

Costs related to the general operation and administration of a business, including salaries of executive personnel, office supplies, and utilities.