Gwen, a general contractor, is a tenant of Alps Apartments. In exchange for four

Question

Gwen, a general contractor, is a tenant of Alps Apartments. In exchange for four months rent ($900/month), Gwen provided the following items and services for the Alps:

Paint and miscellaneous supplies $700
Labor for painting and misc. repairs $1,000
Labor and supplies for paving the parking lot $1,900

How should the Alps treat this transaction for 2004?
a. rental income $3,600; rental expenses $3,600
b.no rental income or expenses because the net effect is $0
c. rental income of $3,600 and depreciation computed on the capital expenditure of $3,600
d. rental income of $3,600, rental expenses of $1,700 and depreciation computed on the capital expenditure of $1,900

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Explanation / Answer

c. rental income of $3,600 and depreciation computed on the capital expenditure of $3,600     We have to show in our accounts which ever incomes received and expenditures spent. Then only we can believe our accounts are perfect. We have to show these expenses as depreciation and deduct from current year incomes. Thank you....

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