Imagine Tom's Annual Salary as an Assistant Store Manager Is

question 9

Multiple Choice

Imagine Tom's annual salary as an assistant store manager is $30,000. He also owns a building that he rents out, earning $10,000 annually, and he has financial assets that 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 in the building he owns. 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 decision should Tom make next?

• A)He should close the shop and return to his old job and use of assets, because he is earning $6,000 less now.
• B)He should keep the shop going, because he's earning $35,000 a year, which is a healthy amount for the business.
• C)He should keep the shop going, because he's earning $5,000 more than the salary he was earning in the past.
• D)He should close the shop, because the accounting profit is negative.