Question

Assume that Clampett, Inc. has $200,000 of sales, $150,000 of cost of goods sold, $60,000 of interest income, and $40,000 of dividends. What is Clampett, Inc.'s excess net passive income?

Answer 1

Answer:

$100,000 = Passive Income

Explanation:

Passive income is the income which is defined as , the income which is almost regular in nature and does not involve any efforts or requires minimal efforts to earn such income.

Here, the normal income that is sales - Cost of goods sold = $200,000 - $150,000 = $50,000

Passive income is interest income and dividend income.

Since such income is earned without any special efforts, thus passive income = $60,000 + $40,000 = $100,000