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The information and answer is given in the images. I just need to know how they calculated imputed interest on housing loan 170. Just need to know the steps. Thanks

The information and answer is given in the images. I just need to know how they calculated imputed interest on housing loan 170. Just need to know the steps. Thanks

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The information and answer is given in the images. I just need to know how they calculated imputed interest on housing loan 170.

Just need to know the steps. Thanks

Malachi had $36,000 for a down payment on his new Ottawa home. Since he had no previous work experience, the banks were reluctant to provide him a mortgage at favourable terms. His employer stepped in and agreed to give him an interest free housing loan of $200,000 beginning on December 1, 2021. Malachi agreed to reduce his salary slightly with respect to this benefit. The loan requires annual payments of $7,600 due at the end of November beginning in 2022. The loan is required to be paid if Malachi dies, sells the home, or terminates his employment. Assume that the prescribed interest rates for such benefits are 2% in each of the first two quarters of 2021 and 1% in the third and fourth quarters.
Transcribed Image Text:Malachi had $36,000 for a down payment on his new Ottawa home. Since he had no previous work experience, the banks were reluctant to provide him a mortgage at favourable terms. His employer stepped in and agreed to give him an interest free housing loan of $200,000 beginning on December 1, 2021. Malachi agreed to reduce his salary slightly with respect to this benefit. The loan requires annual payments of $7,600 due at the end of November beginning in 2022. The loan is required to be paid if Malachi dies, sells the home, or terminates his employment. Assume that the prescribed interest rates for such benefits are 2% in each of the first two quarters of 2021 and 1% in the third and fourth quarters.
The table below could be used to find Malachi Leighton's employment income for the taxation year. Item 1 - Signing bonus Item 1 - Salary received Item 1 - RPP contributions withheld Item 1 - Other items Item 2 - Bonus received Item 3 - Counselling services Item 4 - Group medical coverage Item 5 - Employer contribution to RPP Item 6 - Professional dues paid Item 7 - Wedding gits Item 8 - Squash club membership Item 9 - Housing loss reimbursement Item 10 - Imputed interest on housing loan Item 11 - Stock option benefit Item 12 - Automobile benefit Item 13 - Stationery and supplies Item 13 - Long distance calls Item 13 - Home office Item 14 - Home office allowance Employment income $10,000 $63,050 ($1,100) Nil $2,500 Nil Nil Nil ($149) Nil Nil $2,100 $170 $1,240 $740 ($136) ($71) ($560) $2,100 $79,884
Transcribed Image Text:The table below could be used to find Malachi Leighton's employment income for the taxation year. Item 1 - Signing bonus Item 1 - Salary received Item 1 - RPP contributions withheld Item 1 - Other items Item 2 - Bonus received Item 3 - Counselling services Item 4 - Group medical coverage Item 5 - Employer contribution to RPP Item 6 - Professional dues paid Item 7 - Wedding gits Item 8 - Squash club membership Item 9 - Housing loss reimbursement Item 10 - Imputed interest on housing loan Item 11 - Stock option benefit Item 12 - Automobile benefit Item 13 - Stationery and supplies Item 13 - Long distance calls Item 13 - Home office Item 14 - Home office allowance Employment income $10,000 $63,050 ($1,100) Nil $2,500 Nil Nil Nil ($149) Nil Nil $2,100 $170 $1,240 $740 ($136) ($71) ($560) $2,100 $79,884
Expert Solution
Step 1; Answer

Computation of imputed housing loan interest 

 

Housing loan amount $200,000

Loan taken on November beginning 1 2021

Interest from November to dec 1, so 31 days to be calculated interest on housing loan 

 

=( 1 % ) * ( 200000 ) * ( 31/365 ) = 170

 

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