Lee is a computer programmer who earned $35,000 in 2001. But Lee loves water spo

Question

Lee is a computer programmer who earned $35,000 in 2001. But Lee loves water sports and in 2002 he opened a body board manufacturing business. At the end of the first year of operation, he submitted the following information to his accountant:

                           i.          He stopped renting out his seaside cottage for $3,500 a year and used it as his factory. The market value of the cottage increased from $70,000 to $71,000.

                            ii.          He spent $50,000 on materials, phone, utilities etc.

                            iii.          He leased machines for $10,000 a year.

                          iv.          He paid $15,000 in wages.

                          v.          He used $10,000 from his savings account at the bank, which pays 5 percent a year interest.

                          vi.        He borrowed $40,000 at 10 percent a year from the bank.

                          vii.       He sold $160,000 worth of body boards

                          viii.      Nornal profit is $25,000 a year.

Lee

Explanation / Answer

A. $20,000

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