Problem:
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.
Terry Jim
- Employee Salaries $200,000 $200,000
- Bribes to Police $25,000 $25,000
- Rent and Utilities $50,000 $50,000
- Cost of Goods Sold -0- $125,000
Required:
Question 1: What is Terry and Jim's report as net profit from their businesses?
Note: Please provide reasons to support your answer.