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Bobby is an accountant who uses a portion of his home as his office. His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year; and maintenance expense is $3,000 a year. What is the total amount of these expenses that can be allocated to his home office?

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mchaid015

Answer:

$13,800

Explanation:

Home office occupies 60% of the total space of the total property. Computed as follows;

1,500 sq. ft / 2,500 sq. ft = 60% , Therefore, 60% of the total expenses incurred by his home is allocated to his office on a pro rata basis.

Rent expense $18,000 x 60% = $10,800

Utilities expense $2,000 x 60% = $1,200

Maintenance expense $3,000x60% =$1,800

Total allocation is $10,800 + $1,200 + $1,800 = $13,800

The remaining 40% of the expenses will be allocated as personal expenses of Bobby.

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