Question

[The following information applies to the questions displayed below.] Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, and (4) all debits to Accounts Payable reflect cash payments for inventory. Sales Cost of goods sold Gross profit FORTEN COMPANY Income Statement For Current Year Ended December 31 Operating expenses (excluding depreciation) $ 136,400 24,750 Depreciation expense Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Total assets FORTEN COMPANY Comparative Balance Sheets December 31 Equipment Accumulated depreciation-Equipment $ 602,500 289,000 313,500 161, 150 (9,125) 143,225 29,850 $ 113,375 Current Year Prior Year $ 55,900 $ 77,500 71,810 54,625 281,656 255,800 1,250 1,975 410,616 153,500 (38,625) $ 525.491 389,900 112,000 (48,000) $ 453,900

Answer 1

The accounting profit is $50,000.

Step-by-step explanation:

The firm's accounting profit can be calculated by subtracting the explicit costs from the total revenue.

In this case, the total revenue is $1 million, and the explicit costs include labor ($600,000), capital ($150,000), and materials ($200,000).

Thus, the accounting profit would be $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.