Question

Imagine Tom's annual salary as an assistant store manager is $30,000, he owns a building that rents for $10,000 yearly, and his financial assets generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. What are Tom's accounting profits?

a. $35,000.
b. $50,000.
c. $24,000.
d. $6,000

Answer 1

Tom's accounting profits = $35,000

so correct option is a. $35,000

Step-by-step explanation:

given data

annual salary = $30,000

building rents = $10,000

financial assets = $1,000

outlays in cash = $15,000

earns revenues = $50,000

to find out

Tom's accounting profits

solution

we here get Tom's accounting profits that is express as

Tom's accounting profits = earns revenues - outlays in cash ....................1

put here value we get

Tom's accounting profits = $50,000 - $15,000

Tom's accounting profits = $35,000

so correct option is a. $35,000