42. The gross potential rental income of Manderley Complex is $3,000,000. Its vacancy cost is $100,000. Its other income is $55,000. What is Manderley Complex's effective gross income?
Answer: A
Manderley Complex's effective gross income is $2,955,000.
To calculate the effective gross income, we subtract the vacancy cost from the gross potential rental income and then add any other income. Therefore, the effective gross income is $3,000,000 - $100,000 + $55,000, which equals $2,955,000.
A) $2,955,000
This option correctly represents the effective gross income calculated by taking the gross potential rental income of $3,000,000, subtracting the vacancy cost of $100,000, and adding the other income of $55,000. This results in an effective gross income of $2,955,000, confirming its accuracy.
B) $3,155,000
This option incorrectly adds the vacancy cost instead of subtracting it. If we mistakenly calculated $3,000,000 + $100,000 + $55,000, it would yield $3,155,000, which does not reflect the effective gross income.
C) $3,055,000
This option is also incorrect as it does not properly adjust for the vacancy cost. If we were to add the gross potential rental income and other income without subtracting the vacancy cost, we would arrive at $3,055,000, which misrepresents the calculation of effective gross income.
D) $2,845,000
This option is incorrect as it appears to subtract both the vacancy cost and potentially the other income, leading to an inaccurate figure. The correct calculation would not yield $2,845,000, as it fails to account for the other income appropriately.
Conclusion
The effective gross income of Manderley Complex is definitively $2,955,000, as calculated by accurately subtracting the vacancy cost and adding the other income. All other options fail to properly account for these adjustments, leading to incorrect figures that do not reflect the financial situation of the complex.