Reggie and Bebe own an apartment building in Portland,Oregon,with 8 identical units.They live in one and rent the remaining units.Their rental income for the year was $45,000.They incurred the following expenses for the entire building: $\begin{array}{lr}
\text { Advertising for available units } & \$ 50 \
\text { Maintenance } & 9,000 \
\text { Repairs } & 7,500 \
\text { Utilities } & 12,000 \
\text { Depreciation } & 8,000
\end{array}$ What amount of net income should Reggie and Bebe report for the current year for this rental? (Round your answer to the nearest whole dollar)
A)$7,650
B)$12,213
C)$38,350
D)$45,000

Question

Quizplus · Accepted Answer

To calculate the net income from the rental property, subtract the total expenses from the rental income. The total expenses are the sum of advertising, maintenance, repairs, utilities, and depreciation, which equals $36,550 ($50 + $9,000 + $7,500 + $12,000 + $8,000). Subtracting this from the rental income of $45,000 gives a net income of $8,450. However, since they live in one of the units, they can only count the income and expenses for the 7 rented units, not the 8th unit they occupy. Therefore, we adjust the income and expenses proportionally. The income of $45,000 represents 8 units, so for 7 units, it's 7/8 of $45,000, which equals $39,375. The expenses should also be adjusted to 7/8 of $36,550, equaling $31,862.50. The net income for the 7 units is then $39,375 - $31,862.50 = $7,512.50, which, when rounded to the nearest whole dollar and considering the need for proportional adjustment for the occupied unit, indicates a calculation error in the provided options and explanation. The correct approach involves adjusting both income and expenses for the 7 out of 8 units being rented, but none of the provided choices accurately reflect this corrected calculation. The correct calculation should consider the proportional income and expenses for 7 rented units, but an error in my explanation led to an incorrect conclusion. The correct net income calculation directly from the given options is not accurately represented due to a mistake in adjusting for the owner-occupied unit.

Reggie and Bebe Own an Apartment Building in Portland,Oregon,with 8