Claire and Harry Own a House on Hilton Head Island

question 41

Multiple Choice

Claire and Harry own a house on Hilton Head Island.During the year,Claire and Harry rent the house for 30 days to friends from Texas for $2,000.Claire and Harry use the house a total of 60 days during the year.After making the appropriate allocation of expenses between personal and rental use,the following rental loss was determined: ​
How should Claire and Harry report the rental income and expenses for the forthcoming year?
I.Report the $100 loss for AGI.II.Only expenses up to the amount of $2,000 rental income may be deducted for the year.
III.Include the $2,000 in gross income,but no deductions are allowed.
IV.Nothing needs to be reported.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Statements II and III are correct.
• D)Statements III and IV are correct.
• E)Statements I and III are correct.

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Definitions:

Amortization Expense

Amortization expense is the gradual charging to expense of the cost of an intangible asset over its useful life.

Useful Life

The estimated timeframe that an asset is expected to be usable for its intended purpose.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that serves as a global framework for financial statements.

ASPE

Accounting Standards for Private Enterprises, a set of accounting guidelines for private companies in Canada.