Mike and Pam Own a Cabin near Teluride,Colorado How Should Mike and Pam Report the Rental Income and Year

question 58

Multiple Choice

Mike and Pam own a cabin near Teluride,Colorado.In the current year the cabin was rented for 8 days to friends.Mike and Pam used the cabin a total of 82 days during the same year.After allocating the expenses between personal and rental use,the following rental loss was determined:
$\begin{array}{llcc} \text { Rental income } & \$ 700\\ \text { Froperty taxes } &(250) \\ \text { Mortgage interest } &(300) \\ \text {Repairs and maintenance } &(100) \\ \text { Utilities } &\underline{(150) }\\ \text {Rental loss } & \underline{\$(100) }\\\end{array}$

How should Mike and Pam report the rental income and expenses for last year?

• A)Report the $100 loss for AGI.
• B)Include the $700 in gross income, but no deductions are allowed.
• C)Only expenses up to the amount of $700 rental income may be deducted.
• D)Report the interest ($300) and taxes ($250) as itemized deductions and the other expenses for AGI.
• E)No reporting for the rental activity is necessary.

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Definitions:

Plantwide Overhead Rate

A single rate used to allocate manufacturing overhead costs to all units produced, regardless of the department in which they were made.

Labor Intensive

A process or industry that requires a large amount of labor to produce its goods or services, as opposed to being heavily automated.

Mechanized Work

Work processes that are performed using machinery and equipment to enhance efficiency and productivity.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total factory overhead by the total base units used by all products, applied throughout the entire manufacturing plant.