Which of the Following Statements Is Correct

question 55

Multiple Choice

Which of the following statements is correct?

• A)If a personal residence is rented for fewer than 15 days,the rent income is not included in gross income and no expenses can be deducted.
• B)If a personal residence is rented for more than 14 days,the rent income must be included in gross income and all the related expenses can be deducted.
• C)If a personal residence is rented for more than 14 days and the personal use days exceed 14 days and 10% of the rental days,the rent income must be included in gross income,but the expense deductions are limited to the amount of gross income.
• D)Only a.and b.
• E)Only a.and c.

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Definitions:

Activity Rate

A ratio used to allocate costs to products or services based on the activities that are required to produce them.

Cost Pool

A grouping of individual costs in accounting, typically by department or service center, from which costs are allocated to products or services based on a relevant allocation base.

Overhead Costs

Expenses associated with the day-to-day running of a business that are not directly linked to the production or selling of goods and services.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and considered a part of the product’s cost.