Question

Jaxson, Inc., a calendar year S corporation...

a) How much of the loss may Jean currently deduct?
i) $14,900
ii) $64,800
iii) $11,000
iv) $0

b) Jean's has a suspended loss of _______
a) $14,900
b) $64,800
c) $11,000
d) $0

c) Jean's new basis in the Kaiwan stock is $_______
a) $14,900
b) $64,800
c) $11,000
d) $0

Answer 1

To calculate the firm's accounting profit, the total costs of labor, capital, and materials are subtracted from the total sales revenue, resulting in an accounting profit of $50,000.

Step-by-step explanation:

To calculate a firm's accounting profit, we subtract all the explicit costs from the total sales revenue. In this case, Jaxson, Inc., had sales revenue of $1 million last year. The explicit costs include $600,000 on labor, $150,000 on capital, and $200,000 on materials. Therefore, the firm's accounting profit is calculated as follows:

• Sales revenue: $1,000,000
• Labor costs: $600,000
• Capital costs: $150,000
• Materials costs: $200,000

Accounting Profit = Sales Revenue - Labor Costs - Capital Costs - Materials Costs

Accounting Profit = $1,000,000 - $600,000 - $150,000 - $200,000

Accounting Profit = $50,000

Therefore, the firm's accounting profit was $50,000.