4. Linkin Log opened a real estate leasing business on January 1, 2018 of the current...

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Accounting

4. Linkin Log opened a real estate leasing business onJanuary 1, 2018 of the current year. During the year, the followingtransactions occurred and were recorded in the company'sbooks:

1. John Link, owner, invested $225,000 cash to start the businessLinkin Log.
2. John Link bought a commercial building for $125,000 on March 1,2018. The property was comprised of building of $100,000 and landof $25,000. The building is depreciable over a 25 yearlife for GAAP and a 40 year life for tax.
3. The company paid $5,000 cash to rent office space for the 2018year.
4. The company received $36,000 in rent which represented paymentunder the lease on the property. The payment was for the rentalperiod from January 1 – December 31, 2018.
5. The company paid $1,200 for a maintenance contract under whichservices were rendered during the year.
6. The company received $3,000 of rent which represented paymentunder the lease on the property. The payment was for the rentalperiod from January 1 – January 31, 2019.
7. The company paid cash of $1,500 for utilities for 2018bills.
8. The company paid 2018 property taxes in the amount of $10,000 onJuly 1, 2018 and the company also paid for 2019 property taxes inthe amount of $3,500 on December 15, 2018.
9. The company paid interest expense of $3,000 on itsoutstanding debt during 2018. Accrued, unpaid interestthrough the end of the year, December 31, 2018, was an additional$300.
10. John Link withdrew $5,000 for his personal use from thecompany.
Based on the information above, GAAP net income as computedusing the accrual method of accounting, should be:
___________
Based on the information above, taxable net income as computedusing the accrual method of accounting, should be:
_
Based on the information above, net operating income (NOI) forGAAP as computed under the accrual method of accounting shouldbe:
_
Based on the information above, net income as computed under thecash method of accounting (i.e. not under GAAP) should be:
___________

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Part 1 GAAP net income as computed using the accrual method of accounting Particulars Amount Amount Revenue 3600000 Less Operation Expenses Maintenance 120000 Depreciation 100000 25 x 1012 mar to dec 333300 Rent 500000 Utilities 150000 Property Tax 1000000 Total Operatinng Expenses 2103300 Operating Profit 1496700 See Answer

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Transcribed Image Text

4. Linkin Log opened a real estate leasing business onJanuary 1, 2018 of the current year. During the year, the followingtransactions occurred and were recorded in the company'sbooks:1. John Link, owner, invested $225,000 cash to start the businessLinkin Log.2. John Link bought a commercial building for $125,000 on March 1,2018. The property was comprised of building of $100,000 and landof $25,000. The building is depreciable over a 25 yearlife for GAAP and a 40 year life for tax.3. The company paid $5,000 cash to rent office space for the 2018year.4. The company received $36,000 in rent which represented paymentunder the lease on the property. The payment was for the rentalperiod from January 1 – December 31, 2018.5. The company paid $1,200 for a maintenance contract under whichservices were rendered during the year.6. The company received $3,000 of rent which represented paymentunder the lease on the property. The payment was for the rentalperiod from January 1 – January 31, 2019.7. The company paid cash of $1,500 for utilities for 2018bills.8. The company paid 2018 property taxes in the amount of $10,000 onJuly 1, 2018 and the company also paid for 2019 property taxes inthe amount of $3,500 on December 15, 2018.9. The company paid interest expense of $3,000 on itsoutstanding debt during 2018. Accrued, unpaid interestthrough the end of the year, December 31, 2018, was an additional$300.10. John Link withdrew $5,000 for his personal use from thecompany.Based on the information above, GAAP net income as computedusing the accrual method of accounting, should be:_____________________Based on the information above, taxable net income as computedusing the accrual method of accounting, should be:_____________________Based on the information above, net operating income (NOI) forGAAP as computed under the accrual method of accounting shouldbe:_____________________Based on the information above, net income as computed under thecash method of accounting (i.e. not under GAAP) should be:_____________________