Based on the events below please (a) prepare a balance sheet, (b) an income statement, and (c) taxable income calculation for year ended December 31, 2017 On January 1, Tom, Joe and Marsha form a corporation (TJM) and each contributes $500,000 so that each will be a one third owner TJM On January 5, TJM purchases land for $500,000 On February 1, TJM hires a contractor to build an apartment building for $2,500,000 On February 15, TJM receives a construction loan from JP Morgan for $1,500,000 The term is for 12 months with an interest rate of 10 Assume no principal is paid, and all interest is paid at the end of the year On March 1, TJM draws down $500,000 of the construction loan and pays the contractor On April 1, TJM draws down $500,000 of the construction loan and pays the contractor On May 1, TJM draws down the $500,000 of the construction loan and pays the contractor On June 1, the contractor delivers the building On June 1, TJM rents the entire building to tenants There are 10 residential units in the building and the rent for each unit is $1,600 Property taxes are taxes are $140,000 per year prorated payable from June 1 Management fees are 1 0 of the value of the property (cost for constructed property and land) beginning on June 1

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 03, 2024

Based on the events below please (a) prepare a balance sheet, (b) an income statement, and (c) taxable income calculation for year ended December 31, 2017.

On January 1, Tom, Joe and Marsha form a corporation (TJM) and each contributes $500,000 so that each will be a one third owner TJM.
On January 5, TJM purchases land for $500,000.
On February 1, TJM hires a contractor to build an apartment building for $2,500,000.
On February 15, TJM receives a construction loan from JP Morgan for $1,500,000. The term is for 12 months with an interest rate of 10%. Assume no principal is paid, and all interest is paid at the end of the year.
On March 1, TJM draws down $500,000 of the construction loan and pays the contractor.
On April 1, TJM draws down $500,000 of the construction loan and pays the contractor.
On May 1, TJM draws down the $500,000 of the construction loan and pays the contractor
On June 1, the contractor delivers the building.
On June 1, TJM rents the entire building to tenants. There are 10 residential units in the building and the rent for each unit is $1,600.
Property taxes are taxes are $140,000 per year prorated payable from June 1.
Management fees are 1.0% of the value of the property (cost for constructed property and land) beginning on June 1.