Based on the information given the target share price five years from now is $53.4.
First step is to earning per share for year 5 using this formula
Earning per share for year 5=EPS×(1+Growth Rate)^5
Let plug in the formula
Earning per share for year 5=$1.30×(1+.065)^5
Earning per share for year 5=$1.30×(1.065)^5
Earning per share for year 5=$1.78111266
Second step is to calculate the target share price
Target Stock price=$1.78111266×30
Target Stock price=$53.4
Inconclusion the target share price five years from now is $53.4.
Learn more here:
https://brainly.com/question/18652908
Consequences of business policy
1. Management Should formulate business that are favorable to the interest of the society. By doing this its also promoting its own business interest. Cleary a business organization cannot operate within the a sick society.
2. •Products are adulterated. •Political bribery •Illegal gifts • and other illegal incentives.
3. Consumers are generally weak to fight such as negative business activities, particularly among the poor countries. Consumers in the rich countries are more vigilance against business abuses.
4. Management must consider the impact of every business action upon society. It has to consider whether the action is likely to promote the public good, to advance the basic beliefs of our society, to contribute to its stability, strength and harmony
5. •Should you have a partner? •What type of business organization is the best for you? •Laws that may affect you? •How can your professional help you?
6. The profit factor is a vital element of business. The first responsibility of management is to operate at a profit.
7. Consumers tend to purchase more goods at lower price. And will they get more profit because more goods are bought.
- BRAINLIEST answerer
A jeans maker is designing a new line of jeans. These jeans will sell for $410 per unit and cost $328 per unit in variable costs to make. Fixed costs total $120,000. The contribution margin ratio is:
Based on the fixed costs and the variable costs, the contribution margin ratio is 20%.
The Contribution margin is calculated as:
= Selling price - Variable costs
= 410 - 328
= $82
The Contribution margin ratio is:
= Contribution margin / Selling price
= 82 / 410 x 100%
= 20%
In conclusion, the contribution margin ratio is 20%.
Find out more at https://brainly.com/question/15351788.
hi yabbo daboo gama juice
Answer:
don't even know what u really saying
explain why percentage decreases can never exceed 100%
Answer:
Because if they do they won’t get any money and they will basically sell it for free
Explanation:
pls brainliest
What is a click-and mortar store?
a store with an actual building
a store that sells online only
a store that sells products in malls
a store that sells products in stores and online
Answer:
a store that selles product in stores and online
What is distinctive about double-entry accounting?
A.
It tracks both income and expenses in the same place.
B.
Each piece of information is recorded in at least 2 accounts.
C.
Two copies are made of each record for safety.
D.
Two users must verify the accuracy of each entry.
Answer:
the answer to your question is d
A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. What would be the county's annual profit if they were to process 4,000 prisoners per year at this new location
Based on the information given the county's annual profit if they were to process 4,000 prisoners per year at this new location is $50,000.
Annual profit=Total revenue-Total cost
Where:
Total revenue=(4,000×$75)=$300,000
Total cost=[(4,000×$50)+$50,000]=$250,000
Let plug in the formula
Annual profit=(4,000×$75)-[(4,000×$50)+$50,000]
Annual profit=$300,000-($200,000+$50,000)
Annual profit=$300,000-$250,000
Annual profit=$50,000
Inconclusion the county's annual profit if they were to process 4,000 prisoners per year at this new location is $50,000.
Learn more here: https://brainly.com/question/13308210
One of the major methods of problem solving used by economists is:
a. intuition
b. custom
c. holistic approach
d. the marginal approach
In a simple answer, look at the study of economics, supply/demand, efficient pricing, lowering costs, etc. Now, take those into real world situations and APPLY the to solve the problems that every business has. The problem anyone dealing with economics, government, businesses, institutions have. Apply the economic theories, you will find that life in an office and the classroom can have different problems. Companies tend to be good at the very big stuff; raw materials, manufacturing, sales. Even there they can make improvements. But they spend a lot on transportation, communications, human resources. These things can be improved upon. Apply what you learned to real life problems and solve them.
Sullivan Equipment Sales showed the following.
2020
Jan. 15 Sold $25,200 of merchandise for $29,400 to JanCo; terms 3/5, n/15.
16 Wrote off Fedun’s account in the amount of $15,200.
20 Collected the amount owing from the January 15 sale.
Mar. 1 Accepted a $12,080, 60-day, 7% note dated this day in granting Parker Holdings a time extension on its pastdue account.
Apr. 15 Sold merchandise costing $62,200 for $71,400 to customers who used their Visa credit cards. Visa charges a 1% fee and deposits the cash electronically into the retailer’s account immediately at the time of sale.
? Parker Holdings honoured the note dated March 1.
Nov. 1
Accepted a $24,400, three-month, 6% note dated this day in granting Grant Company a time extension on its past-due account.
Dec. 31 Sullivan’s year-end. Interest was accrued on outstanding notes receivable.
31 Bad debts are based on an aging analysis that estimated $9,700 of accounts receivable are uncollectible. Allowance for Doubtful Accounts showed an unadjusted credit balance of $1,620 on this date.
2021
? Grant Company dishonoured its note dated November 1, 2020.
Mar. 5 Recovered $1,500 from Derek Holston that was previously written off.
14 Wrote off the Grant Company account.
Required:
a. Determine the maturity dates of the March 1 and November 1 notes.
b. Prepare entries as appropriate for each date. (Round the final answers to 2 decimal places. Use 365 days an year.)
Sullivan’s receivable turnovers at December 31, 2020 and 2021 were 7 and 7.5, respectively. Select the correct option for whether the change in the ratio for Sullivan was favourable or unfavourable.
a. The maturity date of the March 1 note is April 29 and that of November 1 note is Jan. 29.
b. Journal Entries:
2020
Jan. 15 Debit Cost of goods sold $25,200
Credit Inventory $25,200
Debit Accounts Receivable (JanCo.) $29,400
Credit Sales Revenue $29,400
terms 3/5, n/15.
Jan. 16 Debit Allowance for Doubtful Accounts $15,200
Credit Accounts Receivable (Fedun) $15,200
Jan. 20 Debit Cash $28,518
Debit Cash Discounts $882
Credit Accounts Receivable (JanCo.) $29,400
Mar. 1 Debit Notes Receivable $12,080
Credit Accounts Receivable (Parker Holdings) $12,080
60-day, 7% note
Apr. 15 Debit Cost of goods sold $62,200
Inventory $62,200
Debit Cash from Visa $70,606
Debit Visa Card Expense $714
Credit Sales Revenue $71,400
April 29 Debit Cash $12,219
Credit Accounts Receivable (Parker Holdings) $12,080
Credit Interest Received $139
Nov. 1 Debit Notes Receivable $24,400
Credit Accounts Receivable (Grant Company) $24,400
three-month, 6% note
Dec. 31 Debit Interests Receivable $244.67
Credit Interest Income $244.67
($24,400 x 6% x 61/12)
Dec. 31 Debit Bad Debts Expense $9,700
Credit Allowance for Doubtful Accounts $9,700
2021
Jan. 29 Debit Accounts Receivable (Grant Company) $24,760.99
Credit Notes Receivable $24,400
Credit Interests Receivable (Grant Company) $244.67
Credit Interest Income $116.32
dishonoured its note dated November 1, 2020.
Mar. 5 Debit Accounts Receivable (Derek Holston) $1,500
Credit Allowance for Doubtful Accounts $1,500
Debit Cash $1,500
Credit Accounts Receivable (Derek Holston) $1,500
Mar. 14 Debit Allowance for Doubtful Accounts $24,760.99
Credit Accounts Receivable (Grant Company) $24,760.99
Data Analysis:
2020
Jan. 15 Cost of goods sold $25,200 Inventory $25,200 Accounts Receivable (JanCo.) $29,400 Sales Revenue $29,400 terms 3/5, n/15.
Jan. 16 Allowance for Doubtful Accounts $15,200 Accounts Receivable (Fedun) $15,200
Jan. 20 Cash $28,518 Cash Discounts $882 Accounts Receivable (JanCo.) $29,400
Mar. 1 Notes Receivable $12,080 Accounts Receivable (Parker Holdings) $12,080 60-day, 7% note
Apr. 15 Cost of goods sold $62,200 Inventory $62,200 Cash from Visa $70,606 Visa Card Expense $714 Sales Revenue $71,400
April 29 Cash $12,219 Accounts Receivable (Parker Holdings) $12,080 Interest Received $139
Nov. 1 Notes Receivable $24,400 Accounts Receivable (Grant Company) $24,400, three-month, 6% note
Dec. 31 Interests Receivable $244.67 Interest Income $244.67 ($24,400 x 6% x 61/12)
31 Bad Debts Expense $9,700 Allowance for Doubtful Accounts $9,700
Allowance for Doubtful Accounts showed an unadjusted credit balance of $1,620 on this date.
2021
Jan. 29 Accounts Receivable (Grant Company) $24,760.99 Notes Receivable $24,400 Interests Receivable (Grant Company) $244.67 Interest Income $116.32
dishonoured its note dated November 1, 2020.
Mar. 5 Accounts Receivable (Derek Holston) $1,500 Allowance for Doubtful Accounts $1,500 Cash $1,500 Accounts Receivable (Derek Holston) $1,500
Mar. 14 Allowance for Doubtful Accounts $24,760.99 Accounts Receivable (Grant Company) $24,760.99
Learn more: https://brainly.com/question/17201601
Fireplace Service company provides fireplace cleaning services and has variable costs of $100 per fireplace cleaning and revenue of $250. Their contribution margin is $_____.
Based on the cleaning and revenue costs, we can calculate that the contribution margin is $150
The contribution margin refers to the amount left from revenue after variable costs are removed.
Contribution margin = Revenue - Variable costs
The contribution margin here is therefore:
= 250 - 100
= $150
In conclusion, the contribution margin is $150.
Find out more at https://brainly.com/question/24596251.
In the shooting of a movie, if something does not go according to script, which member of the team is least likely to notice?
A. Cinematographer
B. director
C. Actor
D. person in charge of continuity
Answer:
A. Cinematographer
Explanation:
They film the movie not read the script.
Home Decor has a debt-equity ratio of .54. The cost of equity is 15.7 percent, the pretax cost of debt is 6.8 percent, and the tax rate is 22 percent. What will be the cost of equity if the debt-equity ratio is revised to .65
If the debt-equity ratio is revised from 0.54 to 0.65, the cost of equity will be 11.95%.
Data and Calculations:
Debt-equity ratio = 0.54
Weight of equity = 0.46 (1 - 0.54)
Cost of equity = 15.7%
Pretax cost of debt = 6.8%
Tax rate = 22%
Post-tax cost of debt = 5.3% (6.8% (1 - 22%)
Revised debt-equity ratio = 0.65
Revised weight of equity = 0.35 (1 - 0.65)
Thus, if the cost of equity is 15.7% when equity ratio is 0.46, then the cost of equity will be 11.95% (15.7%/0.46 x 0.35) when the equity ratio revises to 0.35.
Learn more: https://brainly.com/question/25650869
The cost of equity would 16.43% if the debt equity is revised to 0.65
Solution
The debt equity ratio = 0.54
To get the cost of the debt post tax:
= 6.8%*(1-0.22)
= 0.068*0.78
= 0.05304
= 5.304%
Next we are to get the WACC
[tex]WACC= 15.7percent*\frac{1}{1+0.54} *5.304percent*\frac{0.54}{1+0.54}[/tex]
WACC = 0.157*0.6494+0.05304*0.3506
= 0.1205
= 12.05%
Since the Debt equity ratio is revised to 0.65 and WACC stays the same
We would have
[tex]12.05percent = Ke*\frac{1}{1+0.65} +5.304percent*\frac{0.65}{1+0.65}[/tex]
0.1205 = Ke*0.606+0.05304*0.3939
0.1205 = 0.606Ke + 0.02089
We collect like terms
0.1205-0.02089 = 0.606Ke
0.09961 = 0.606Ke
Ke = 0.1643
= 16.43 percent
The cost of equity would 16.43% if the debt equity is revised to 0.65
Read more on https://brainly.com/question/25760702?referrer=searchResults
QUESTION 10 of 10: You have been promoted to buyer for a mall-based fashion retailer. With your promotion, you will earn an additional
$4,000 per year. If you previously earned $58,000, what is the percentage increase in your salary?
6.9% or 14.5%
Explanation:
I did the math
I belive 6.9% is the correct answer tho
An economy has two workers, Anne and Bill. Per day of work, Anne can pick 30 apples or 120 bananas, and Bill can pick 40 apples or 40 bananas. Anne and Bill each work 200 days per year. a. Anne's opportunity cost of picking one more apple is . Bill's opportunity cost of picking one more apple is . has a comparative advantage in apple picking. has an absolute advantage in apple picking.
Opportunity Cost is the opportunity or cost lost because another product or commodity is chosen.
Comparative advantage is when a person or entity gives up a lower opportunity cost for the same product or thing compared to the other person or entity.
Absolute advantage means when a person can produce or do more of a thing then the other person.
Anne's opportunity cost of picking an apple is 4 bananas.
Bill's Opportunity cost of picking an apple is 1 banana.
Bill has a comparative advantage of picking an apple.
Bill has an absolute advantage of picking an apple
Anne can pick 30 apples and 120 bananas.
It means if she picks an apple she will have to leave out 4 bananas.
Her opportunity cost of picking an apple is 4 bananas.
Similarly Bill has to give up 1 banana to pick another apple.
Bill's Opportunity cost of picking an apple is 1 banana.
Anne's opportunity cost of picking an apple is 4 bananas.
Bill has a comparative advantage of picking an apple because he will have to leave out only 1 banana as compared to Anne who has to leave out picking 4 bananas .
Anne's opportunity cost of picking a banana is 1/4 apples.
Bill's Opportunity cost of picking a banana is 1 apple.
Bill has an absolute advantage of picking an apple because he can pick more apples (40× 200= 8000) as compared to Anne who can pick less apples in the given number of days (30× 200= 6000) if resources are fixed.
https://brainly.com/question/15728547
https://brainly.com/question/22567347
https://brainly.com/question/17863780
Amy convenes a meeting to rethink the organizational structure to avoid being beat to the market by a competitor again. Based on your initial impressions of the situation, which solution do you think might be more effective: increase formalization or reduce hierarchy
Amy should reduce hierarchy if she wants to avoid being beaten by competitors.
A reduction of hierarchy will realign the company to achieve its goals faster than operating with a formalized hierarchy. This restructuring or delayering is known as empowerment.
The advantages that Amy will achieve by delayering or reducing hierarchy include:
Simplifying the organization's management structuresReducing its bureaucracyCutting its communication pathsSpeeding up decision-makingPushing responsibility down to lower organizational levels (through empowerment).
Thus, Amy should rethink the organizational structure by reducing the hierarchy, making the decision-making process accessible.
Learn more: https://brainly.com/question/10849707
Skinner Baking Company is ready to launch a coffeecake line under the Skinner Baking 108 label. Which condition for favorable branding will likely be easiest for Skinner Baking Company to achieve
Answer:
Hybrid bikes
Explanation:
which one of the following statement is false in respect of public law ?
A public law determines of state authority
b constitutional is a brach of public law
c relationship between the state and members of public are always equal
Answer:
The correct answer is C!
Explanation:
Minor Corporation purchases 5,000 shares of its $4 par common stock at $7 per share and also has an outstanding loan of $100,000.
Under the provisions of the contract of the loan, Minor is required to maintain 25% of the balance of the loan in retained earnings at
all times. What is the current minimum retained earnings restriction for the company?
O $40,000
O $45,000
O $60,000
O $0
The current minimum retained earnings restriction for the company is $60,000
Restriction of retained earnings for Loan = Outstanding loan * % of maintained balance
Restriction of retained earnings for Loan = $100,000 * 25%
Restriction of retained earnings for Loan = $25,000
Restriction of retained earnings for treasury Stock = Purchased shares * $7 per share
Restriction of retained earnings for treasury Stock = 5000 shares * $7
Restriction of retained earnings for treasury Stock = $35,000
Current Minimum retained earnings restriction = Restriction of retained earnings for Loan + Restriction of retained earnings for treasury Stock
Current Minimum retained earnings restriction = $25,000 + $35,000
Current Minimum retained earnings restriction = $60,000
Therefore, the Option C is correct because current minimum retained earnings restriction for the company is $60,000
See similar solution here
brainly.com/question/15738199
a. Suppose the Federal Reserve wants to increase the money supply. What should it do to accomplish this goal
If the Federal reserve want to increase the money supply what they would do would be to reduce or lower the discount or the interest rate in the economy.
When the interest rate is lowered, it would discourage savings. There would be an increase in the consumption of goods and services in the economy.
Also lowering the discount rate is going to cause the banks to want to borrow more reserves from the Fed. It would then be able to create more loans.
This would lead to a raise in the money supply.
Read more on https://brainly.com/question/2238267?referrer=searchResults
If Maverick Incorporated can reasonably estimate warranty costs as 2% of total monitor sales each year, what will the company need to do to account for the lifetime warranty in its financial statements
Answer:
Record it as a liability
Explanation:
If Maverick Incorporated can reasonably estimate warranty costs as 2% of total monitor sales each year, the company needs to record as per liability account for the lifetime warranty in its financial statements.
What is Liability?Accounts payable, wages and taxes are examples of current responsibilities, which are fully owed for continuing costs. Current obligations will also include costs on long-term debt due in the subsequent year.
Liabilities include things like -
a bank loan
a mortgage loan
Amount due to suppliers (accounts payable)
Settled wages
tax debt
Liabilities are listed on a corporation balance sheet. The entire number of liabilities must match the contrast between the total quantity of assets and the total quantity of equity, according to the accounting equation.
To learn more about Liability follow the link.
https://brainly.com/question/28391467
#SPJ2
The volume of export activity in the world economy has increased as exporting has become easier, especially due to the gradual decline in trade barriers under the umbrella of GATT and now the WTO. Regional economic agreements such as the European Union and the North American Free Trade Agreement have also significantly increased export opportunities. Even though export activity in the world economy has increased, exporting remains a challenge for many firms. Smaller enterprises can find the process intimidating due to a host of issues ranging from mechanics of importing and exporting to dealing with countertrade. There are several promises and pitfalls to exporting. Read each statement to determine if it is true or false.
The statement that many novice exporters underestimate the time and expertise needed to cultivate business in foreign cultures is logically true.
From the complete question, it should be noted that exports account for a large percentage of the United States firm's sales.
Furthermore, large revenue and profit opportunities abound in foreign markets for most firms in most of the industries
In conclusion, many foreign customers do not require face-to-face negotiation when conducting business.
Read related link on:
https://brainly.com/question/25573466
What are the three important elements to consider when defining demand and supply?
Answer:
Price Fluctuations. Price fluctuations are a strong factor affecting supply and demand. ...
Income and Credit. Changes in income level and credit availability can affect supply and demand in a major way. ...
Availability of Alternatives or Competition. ...
Trends. ...
Commercial Advertising. ...
Seasons.
Universal Bank pays 7% interest, compounded annually, on time deposits. Regional Bank pays 6% interest, compounded quarterly. Based on effective interest rates, in which bank would you prefer to deposit your money?
Briefly explain 2 functions of an offcice
Answer:
An office is the center point of organization. ... The office performs a clerical function such as information collection, recording analyzing, distribution of information and executive function such as planning, policies formulation, organization, decision making etc.
Explanation:
The RRR is 20%. Total demand deposits in the economy equal $2 billion. Banks in the economy are fully lent up (i.e., are holding no excess reserves). The Fed then lowers the RRR to 10%. As a result, the money supply, assuming that banks continue to be fully lent up and that there are no cash leaks, shall __________________ . (Hint: First calculate bank's cash reserves as 20% of $2 billion
This tells us that if there are no cash leaks there would be a rise by 2 billion dollars in the money supply.
The total demand deposit = 2 billion dollars
The RRR is said to be = 20%
This is now = 10%.
20% of 2billion =
[tex]\frac{20}{100} *2000000000\\\\= 400million[/tex]
10% of 2billion = 200 million.
The excess = 400m - 200m
= 200m
The money = 200*1/0.10
= 2 billion dollars.
10% is kept while 90% is lent out compared to before when 20% was kept and 80% lent out.
Former multiplier = 1/0.20 = 5
Multiplier now = 1/0.10 = 10.
This tells us that if there are no cash leaks there would be a rise by 2 billion dollars in the money supply.
Read more on https://brainly.com/question/17000697?referrer=searchResults
Fariq purchases and places in service in 2020 personal property costing $2,611,000. The taxpayer plans to apply the Sec. 179 deduction, but not bonus depreciation. What is the maximum Sec. 179 deduction that Fariq can deduct, ignoring any taxable income limitation
The maximum deduction that Fariq can deduct is $1,019,000
Solution
In the year 2020, the Sec 179 deduction expense is given as 1040000 dollars. This the deduction expense given that the qualifying personal property has a worth that is greater than 2590000 dollars.
Then the phase out would be the difference between the amount of investment and property cost
Phase out = 2611000 - 2590000
= 21000 dollars
Maximum Sec. 179 deduction = $1,040,000 - 21000
= $1,019,000
The maximum deduction that Fariq can deduct is therefore $1,019,000
Read more on https://brainly.com/question/15581089?referrer=searchResults
A company failed to record unrealized gains of $37 million on its available for sale debt security investments. Its tax rate is 25%. As a result of this error, comprehensive income would be:
Answer:
Question #1
A company failed to record unrealized gains of $32 million on its available for sale security investments. Its tax rate is 35%. As a result of this error, comprehensive income would be:
a) Understated by $20.80 million
b) Overstated by $11.20million
c) Understated by $32.00 million
d) Unaffected
Question #2
A company failed to record unrealized gains of $21 million on its trading security investments. Its tax rate is 40%. As a result of this error, total shareholders' equity would be:
a) Understated by $12.60 million
b) Understated by $21.00 million
c) Understated by $8.40 million
d) Unaffected
PLEASE show me your entire work for full credit. Thanks!!
Compared to Country Y, Country X has a comparative advantage in producing computers. Country Y has a comparative advantage over Country X in producing automobiles. How can the two countries BEST take advantage of this situation?
Country X and Country Y can impose barriers to trade between themselves.
Country X and Country Y can specialize their production and trade with each other.
County Y can stop producing goods and import all of its products from Country X.
Country X can stop producing goods and import all of its products from Country Y.
Suppose the value of the Japanese yen appreciates relative to the US dollar. Who would this benefit? Select all that apply.
Japanese tourists visiting the United States
US tourists visiting Japan
Japanese exporters of goods to the United States
US importers of goods from Japan
Japanese importers of goods from the United States
Look at the exchange rate table. Then answer the question that follows.
Ethan is an American who buys and sells goods in the international market. He recently bought goods that cost 10,000 yen from a company in Japan. How much money did he spend in US dollars?$100
$1,000
$10,000
$100,000
When a country or organization is able to produce a certain good or service at a lower opportunity cost than competitors, such country organization is said to have a comparative advantage on such product.
1.)
Hence, the best way to both countries can take advantage of the situation is for countries X and Y to specialize in that good in which it has comparative advantage, then trade with one another.
2.)
Since the Japanese yen has appreciated over the dollar, then, the beneficiaries would be ;
Japanese importers of goods from the United StatesJapanese tourists visiting the United StatesThese is because they could get more with less.
3.)
Total cost of goods = 10,000 yen
100 yen = $1
10000 yen = x
Cross multiply
100x = 10000
x = 10000 ÷ 100
x = 100
Hence, Ethan has spent $100
Learn more :https://brainly.com/question/25553664
Walt Disney reports the following information for its two Parks and Resorts divisions. U.S. International Current Year Prior Year Current Year Prior Year Hotel occupancy rates 87 % 83 % 79 % 78 % Assume Walt Disney uses a balanced scorecard and sets a target of 85% occupancy in its resorts. (1) Which division(s) exceeded the occupancy target during the current year
The division that exceeded the occupancy target during the current year was the United States because it had 87% occupancy.
A balanced scorecard is a management model that groups together various data to evaluate the result of a strategy related to the objectives.
A balanced scorecard works through indicators that allow aligning the behavior of the organization's members with the company's strategy.
Based on the above and the chart, the only resort that exceeded the occupancy target (85%) during the current year was the United States resort (87%)
Learn more in: https://brainly.com/question/8317241
Jessica purchased a home on January 1, 2021, for $500,000 by making a down payment of $200,000 and financing the remaining $300,000 with a loan, secured by the residence, at 6 percent. During 2021 and 2022, Jessica made interest-only payments on this loan of $18,000 (each year). On July 1, 2021, when her home was worth $500,000, Jessica borrowed an additional $125,000 secured by the home at an interest rate of 8 percent. During 2021, she made interest-only payments on the second loan in the amount of $5,000. During 2022, she made interest-only payments on the second loan in the amount of $10,000. What is the maximum amount of the $28,000 interest expense Jessica paid during 2022 that she may deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard
Since Jessica used the proceeds of the second loan to improve her acquired home, the two debts are counted as acquisition indebtedness, and she can deduct $28,000 as an itemized deduction for mortgage interest expense.
Data and Calculations:
Home Purchase on January 1, 2021 = $500,000
Down payment made $200,000
Mortgage financing obtained = $300,000
Mortgage interest rate = 6%
Interest-only payments in 2021 and 2022 = $18,000 ($300,000 x 6%) each
Additional mortgage on July 1, 2021 = $125,000
Interest rate for the second mortgage = 8%
Interest-only payment in 2021 = $5,000 ($125,000 x 8% x 6/12)
Interest-only payment in 2022 = $10,000 ($125,000 x 8%)
Total interest-only payment in 2022 = $28,000 ($18,000 +$10,000)
Question Options:
a. $0
b. $10,000
c. $26,353
d. $26,000
e. $28,000
Thus, the maximum amount that Jessica may deduct as an itemized deduction is $28,000.
Learn more: https://brainly.com/question/14187831