Final answer:
For the sale of the old machine, Flint company would make different accounting entries based on the sale price relative to the book value of the machine. Gains or losses on the sale are recognized depending on whether the sale price is above or below the book value. In the profit calculation scenario, the firm's accounting profit is the difference between the sales revenue and the sum of all costs, resulting in a profit of $50,000.
Step-by-step explanation:
Accounting for Assets and Profit Calculation
The question is in the realm of accounting, specifically dealing with the sale of fixed assets and the calculation of profit. When Flint company sells an old factory machine, the accounting entries will depend on the sale price in comparison to the book value of the machine. The machine's cost is $60,000, and it has accumulated depreciation of $33,600, which means the book value of the machine is $60,000 - $33,600 = $26,400.
(a) If the machine is sold for $30,600 cash, the entry would be:
- Debit Cash $30,600
- Debit Accumulated Depreciation $33,600
- Credit Equipment $60,000
- Credit Gain on Sale of Equipment $4,200
(b) If the machine is sold for $20,600 cash, the entry would be:
- Debit Cash $20,600
- Debit Accumulated Depreciation $33,600
- Debit Loss on Sale of Equipment $5,800
- Credit Equipment $60,000
In the profit calculation scenario, if a firm had sales revenue of $1 million and its costs were $600,000 for labor, $150,000 for capital, and $200,000 for materials, we calculate the firm's accounting profit by subtracting total costs from the sales revenue:
Accounting Profit = Sales Revenue - Total Costs
Accounting Profit = $1,000,000 - ($600,000 + $150,000 + $200,000)
Accounting Profit = $1,000,000 - $950,000
Accounting Profit = $50,000