Rocky Owns the Palms Apartments

question 1592

Essay

Rocky owns The Palms Apartments. During the year, Molly Ann, a tenant, moved to another state. Molly Ann paid Rocky $1,500 to cancel the two- year lease she had signed. Rocky then rented the apartment to Elvis who paid the first and last months' rents of $500 each and a security deposit of $800. Rocky also owns a building used as a dance club. The owner of the club requested that Rocky add on another room to be used for private parties. Rocky refused but allowed the club owner to make the addition at a cost of $20,000. What amount should be included in Rocky's income with regard to these items?

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Definitions:

Disposable Income

Post-tax income households possess for saving or spending purposes.

Disposable Income

Disposable income refers to the sum of money that families can use for expenditures and savings once income taxes are deducted.

MPS (Marginal Propensity to Save)

The proportion of an increase in income that an individual or population saves rather than spends on consumption.

APC (Average Propensity to Consume)

The fraction of income that households plan to spend on goods and services; it is the ratio of total consumption to total disposable income.