Question

For each of the scenarios, identify the type of income earned based on the categories of income approach.

Answer 1

Answer:

a. rental income

b. compensation of employees

c. proprietor's income

d. miscellaneous adjustments

e. corporate profits

f. net interest

Explanation:

Rental income: By renting out part of her duplex, Anita House earns rental income.

Compensation of employees: The income earned by Mos Quito falls under the compensation of employees (i.e., employee income) category because it is a wage.

Proprietor's income: Exterminators Plus is an owner‑operated business. The income earned is proprietor's income for labor, capital, and profit.

Miscellaneous adjustments: This category is for money collected by firms but not earned by them, such as sales taxes paid by consumers. Firms collect the tax money and send it  to the government.

Corporate profits: Noah Count, Inc., is a corporation that earns corporate profits, some of which are paid out as dividends to its owners, the stockholders. Bugs B Dead, Inc., is a family‑owned corporation. Even though it is small corporation, the income (i.e., profits) earned by Bugs B Dead, Inc. is still counted in the corporate profits category.

Net interest: Bugs B Dead, Inc. is a corporation, which is a type of business. The interest that Bugs B Dead, Inc. pays on its short‑term loan is counted as net interest.