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: 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)

Question

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:  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)

Quizplus · Accepted Answer

To determine the net income, we need to subtract the total expenses from the rental income. 
Total expenses = $14,787 (maintenance + interest + property tax + insurance + depreciation)
Net income = Rental income - Total expenses 
Net income = $45,000 - $14,787 
Net income = $30,213 
However, since Reggie and Bebe co-own the building, they need to split this net income equally. 
Each party's share of the net income = $30,213 / 2 = $15,106.50 
Rounded to the nearest whole dollar, the net income that Reggie and Bebe should report for the current year is $12,213 (answer choice B).

Reggie and Bebe Own an Apartment Building in Portland, Oregon