Terry and Jim Are Both Involved in Operating Illegal Businesses

question 125

Multiple Choice

Terry and Jim are both involved in operating illegal businesses. Terry operates a gambling business and Jim operates a drug running business. Both businesses have gross revenues of $500,000. The businesses incur the following expenses.
$\begin{array}{lrr}& \text { Terry } & \text { Jim } \\\text { Employee salaries } & \$ 200,000 & \$ 200,000 \\\text { Bribes to police } & 25,000 & 25,000 \\\text { Rent and utilities } & 50,000 & 50,000 \\\text { Cost of goods sold } & -0- & 125,000\end{array}$
Which of the following statements is correct?

• A) Neither Terry nor Jim can deduct any of the above items in calculating the business profit.
• B) Terry should report profit from his business of $250,000.
• C) Jim should report profit from his business of $500,000.
• D) Jim should report profit from his business of $250,000.
• E) None of the above.

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Reward System

A set of policies, mechanisms, and tools used by organizations to motivate and acknowledge employees' contributions.

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