Katie and Mike Own a Home in Newport Beach,California

question 98

Multiple Choice

Katie and Mike own a home in Newport Beach,California.During the year,they rented the house for 80 days for $24,000 and used it for personal use for 30 days.The expenses for the house included $20,000 in mortgage interest,$8,500 in property taxes,$6,000 in utilities,$2,000 in maintenance,and $12,000 in depreciation.What is the deductible loss for the rental of their home (without considering the passive loss limitation) ? Use the IRS method for allocation of expenses.

• A)$0.
• B)$5,000 net income.
• C)$17,414 net loss.
• D)$27,500 net loss.

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Definitions:

Direct Labour Hours Quantity

The total number of labor hours spent by workers who are directly involved in the production of goods or services.

Standard Cost

An estimated or pre-determined cost of performing an operation or producing a good, used in budgeting and pricing.

Actual Cost

The tangible and realized expense incurred for materials, labor, and overhead in the production of goods or services.

Standard Cost Systems

An accounting method that uses standard costs for direct materials, labor, and overhead to help managers control business costs.