Martin and Joe Are Equal Partners in Ferrell Company In Addition to His Ferrell Company Earnings,Martin Has Other Income

question 32

Multiple Choice

Martin and Joe are equal partners in Ferrell Company.For the current year,Ferrell Company reports the following items of income and expense:
$\begin{array}{lr}\text { Sales revenues } & \$ 500,000 \\\text { Long-term capital gains } & 14,000 \\\text { Short-term capital losses } & (10,000) \\\text { Trade and business expenses } & (200,000) \\\text { Limited partnership loss } & \underline { (50,000) }\\\text { Taxable income } & \underline {\$ 254,000} \\\end{array}$
In addition to his Ferrell Company earnings,Martin has other income of $35,000.Included in the $35,000 is a $10,000 loss from the sale of land held as an investment.Martin's adjusted gross income is:

• A)$162,000
• B)$167,000
• C)$172,000
• D)$187,000
• E)$192,000

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Definitions:

Margin

The difference between the sales price of a good or service and its cost, expressed as a percentage of the sales price.

Investment Centre

A segment or area of a business responsible for both its revenue and its investments.

Residual Income

The amount of income that exceeds the minimum rate of return or hurdle rate, often used in performance measurement.

Operating Assets

Assets that are used for the core operations of a business, necessary for creating goods or services to be sold.