Adjusting entries are made after the preparation of financial statements.
Answer the following statement true (T) or false (F)
False
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Bob and April own a house at the beach. The house was rented to unrelated parties for eight weeks during the year. April and the children used the house 12 days for their vacation during the year. After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows: Gross rental income $4,000 Less: Mortgage interest and property taxes$3,500 Other allocated expenses 2,000 (5,500) Net rental loss ($1,500) ? What is the correct treatment of the rental income and expenses on Bob and April’s joint income tax return for the current year assuming the IRS approach is used if applicable?
A. A $1,500 loss should be reported. B. Only the mortgage interest and property taxes should be deducted. C. Since the house was used more than 10 days personally by Bob and April, the rental expenses (other than mortgage interest and property taxes) are limited to the gross rental income in excess of deductions for interest and taxes allocated to the rental use. D. Since the house was used less than 50% personally by Bob and April, all expenses allocated to personal use may be deducted. E. Bob and April should include none of the rental income or expenses related to the beach house in their current year income tax return.
When used for performance evaluation, periodic internal reports based on a responsibility accounting system should not
a. be related to the organization chart. b. include allocated fixed overhead. c. include variances between actual and budgeted controllable costs. d. distinguish between controllable and noncontrollable costs.
When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered
a. normal and discrete. b. normal and continuous. c. abnormal and discrete. d. abnormal and continuous.
Explain the components of report text