Terry and Jim Are Both Involved in Operating Illegal Businesses

question 2

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. $$\begin{array} { l r r } & \underline {\text { Terry} } & \underline { \text { Jim } } \\\text { Employee salaries } & \$ 200,000 & \$ 200,000 \\\text { Bribes to police } & 25,000 & 25,000 \\\text { Rent and utilities } & 50,000 & 50,000 \\\text { Cost of goods sold } & - 0 - & 125,000\end{array}$$ Which of the following statements is correct?

• A)Neither Terry nor Jim can deduct any of these 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 these.

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Definitions:

Convex Lens

A lens that converges light rays to a point, having a curved shape that is thicker in the middle than at the edges, used to correct farsightedness.

Visual Acuity

The clarity or sharpness of vision, measured as the capability to identify letters or numbers at a standardized distance.

Accommodation

The eye's ability to change its focus from distant to near objects, achieved by changing the lens shape.

Diverge

To move or extend in different directions from a common point; to branch off.