Louis received a "hot tip" from a friend about Fine Mine Ltd. He borrowed $10,000 from a bank April 1, 2020 and used the funds to purchase 1,000 common shares in the company for $10 each. Louis sold the shares June 30, 2020 for $15 a share and repaid the loan which included $148 of interest. As a result of these transactions Louis's net income for 2020 would have increased by:

Question

Quizplus · Accepted Answer

Louis's net income increased by the profit from selling the shares minus the interest paid on the loan. He bought the shares for $10,000 (1,000 shares at $10 each) and sold them for $15,000 (1,000 shares at $15 each), making a gross profit of $5,000. After subtracting the $148 of interest paid on the loan, his net income increase is $4,852 ($5,000 - $148 = $4,852).

Louis Received a "Hot Tip" from a Friend About Fine