Question

Moorman Corporation reports the following information:

Correction of understatement of depreciation expense
in prior years, net of tax $1,290,000
Dividends declared 960,000
Net income 3,000,000
Retained earnings, 1/1/17, as reported 6,000,000
Moorman should report retained earnings, 12/31/17, as adjusted at
a. $4,710,000.
b. $6,750,000.
c. $8,040,000.
d. $9,330,000.

Answer 1

The firm's accounting profit is $50,000.

Step-by-step explanation:

To calculate the firm's accounting profit, we need to subtract the total explicit costs from the total revenues. In this case, the firm's total revenues are $1 million. The total explicit costs are the sum of labor, capital, and materials, which amounts to $600,000 + $150,000 + $200,000 = $950,000. Therefore, the firm's accounting profit is $1 million - $950,000 = $50,000.