Final answer:
The question involves transactions relating to business accounting: issuance of common stock, purchasing inventory, selling inventory, and advertising expenses. Calculating net profit from stock transactions involves subtracting the purchase cost and transaction fees from the selling price. The general formula to calculate accounting profit is total revenues minus explicit costs.
Step-by-step explanation:
The student's homework question pertains to basic accounting transactions involving the issuance of common stock and managing inventory and expenses. When a company has acquired $30,000 cash from the issue of common stock, it has increased its equity and cash flows. Subsequently, it purchased inventory for $15,000 cash, which is an outflow of cash and an increase in inventory assets. Selling inventory that cost $9,000 for $20,000 cash represents revenue for the company and is the inflow of cash. Lastly, paying $1,500 for advertising expense impacts the income statement as an expense, reducing net income.
To calculate the net profit from stock transactions, you need to consider the purchase price, the selling price, and the transaction costs. As illustrated by the reference, if Randy purchased 800 shares of stock at $19.50 per share and sold them at $34.50 per share, with a $10 transaction fee for each purchase and sale, his profit would be calculated as follows:
- Initial investment = 800 shares * $19.50 = $15,600
- Selling price = 800 shares * $34.50 = $27,600
- Total transaction fees = $10 (buying) + $10 (selling) = $20
- Net profit = $27,600 - $15,600 - $20 = $11,980
Using this formula, students can calculate the net profit from any stock transaction by applying the same methodology. For example, LibreTexts™ provides an equation for calculating accounting profit as total revenues minus explicit costs, demonstrating fundamental accounting principles.