Question

Conrad Company reported the following balances at June 30, 2015:

Sales Revenue
$16,200
Sales Returns and Allowances
600
Sales Discounts
300
Cost of Goods Sold
7,500
Net sales for the month is
A) $7,800
B) $15,300.
C) $15,600.
D) $16,200.

Answer 1

The firm's accounting profit is calculated by subtracting the total costs from the sales revenue, which equals $50,000. The merchandise balance of trade shows a trade deficit of -$516 billion, and the current account balance is -$419 billion.

Step-by-step explanation:

To calculate the accounting profit, we need to subtract all the explicit costs from the sales revenue. In the provided scenario, a firm had sales revenue of $1 million. The costs incurred included $600,000 on labor, $150,000 on capital, and $200,000 on materials. Summing up the costs which are $600,000 + $150,000 + $200,000, we get a total cost of $950,000.

Therefore, to find the accounting profit, we take the sales revenue of $1 million and subtract the total costs of $950,000, leaving us with an accounting profit of $50,000.

In relation to merchandise trade balance, it is the difference between the value of exports and imports. A negative balance, or trade deficit, indicates that imports exceed exports. This is shown in the scenario where the merchandise balance of trade equals -$516 billion, which implies a trade deficit of -$516 billion. The current account balance, which includes the merchandise balance and other items like services and income, is at -$419 billion.