Ada Company owns and manages apartments. On signing a lease, each tenant must pay the first month and last month rent and a Php50,000 refundable security deposit. The security deposit is rarely refundable in total because cleaning costs of Php15,000 per apartment are almost always deducted. About 30% of the time, the tenants are also charged for damages to the apartment which typically cost Php10,000. If a one-year lease is signed on a Php90,000 per month apartment, what amount should be reported as refundable security deposit?

Ada Company owns and manages apartments. On signing a lease, each tenant must pay the first month and last month rent and a Php50,000 refundable security deposit. The security deposit is rarely refundable in total because cleaning costs of Php15,000 per apartment are almost always deducted. About 30% of the time, the tenants are also charged for damages to the apartment which typically cost Php10,000. If a one-year lease is signed on a Php90,000 per month apartment, what amount should be reported as refundable security deposit?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 82P: Lorene, Inc., owns an apartment complex. The terms of Lorenes lease agreement require new tenants to...

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Lorene, Inc., owns an apartment complex. The terms of Lorenes lease agreement require new tenants to pay the first and last months rent and a cleaning deposit at the inception of the lease. The cleaning deposit is returned when tenants move out and leave their apartment in good condition. If the apartment is not in good condition, Lorene hires a cleaning company and uses the tenants deposit to pay the cleaning bill, with any excess deposit returned. During the current year, Lorene receives monthly rents totaling 28,000, last months rent deposits from new tenants of 8,000, and cleaning deposits of 7,000. Lorene keeps 5,000 in cleaning deposits to pay the cleaning company bill on apartments that are not left in good shape (the 5,000 is the actual cost that is paid in cash to the cleaning company) and returns 4,000 in deposits. Lorenes expenses related to the rental property (other than the cleaning costs) are 14,000. What is Lorene, Inc.s gross income from the rental property if Lorene is a cash basis taxpayer? an accrual basis taxpayer?
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