ACCT 401

Indicate the amount (if any) that Josh can deduct as an ordinary and necessary business deduction in each of the following situations. (Leave no answers blank. Enter zero if applicable.)

a. Josh borrowed $59,000 from First State Bank using his business assets as collateral. He used the money to buy City of Blanksville bonds. Over the course of a year, Josh paid interest of $5,700 on the borrowed funds, but he received $4,100 of interest on the bonds.

b. Josh purchased a piece of land for $77,500 in order to get a location to expand his business. He also paid $8,000 to construct a new driveway for access to the property.

c. This year Josh paid $24,400 to employ the mayors son in the business. Josh would typically pay an employee with these responsibilities about $21,700, but the mayor assured Josh that after his son was hired, some city business would be coming his way.

d. Josh paid his brother, a mechanic, $3,400 to install a robotic machine for Joshs business. The amount he paid to his brother is comparable to what he would have paid to an unrelated person to do the same work. Once the installation was completed by his brother, Josh began calibrating the machine for operation. However, by the end of the year, he had not started using the machine in his business.

Melissa recently paid $400 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses: $250 fee to register for the conference, $300 per night for three nights' lodging, $200 for meals in restaurants, and $150 for cab fare. (Do not round internediate calculations. Round your final answers to the nearest whole dollar amount. Leave no answers blank. Enter zero if applicable.)

a. What amount of these costs can Melissa deduct as business expenses?

b. Suppose that while Melissa was on the coast, she also spent two days sightseeing the national parks in the area. To do the sightseeing, she paid $1,000 for transportation, $800 for lodging, and $450 for meals during this part of her trip, which she considers personal in nature. What amount of the total costs can Melissa deduct as business expenses?