Question

At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash 7,600 Inventory 1,600 Common stock 7,100 Retained earnings 2,100 During Year 2, the company experienced the following events: Purchased inventory that cost $5,100 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Transportation costs of $460 were paid in cash. Returned $300 of the inventory it had purchased because the inventory was damaged in transit.

Answer 1

The accounting profit of the firm is $50,000, calculated by subtracting the costs from the sales revenue.

Step-by-step explanation:

The subject of this question is Business and the grade level is High School.

In this question, we are given the sales revenue, labor cost, capital cost, and material cost of a firm. To calculate the accounting profit, we need to subtract the sum of labor cost, capital cost, and material cost from the sales revenue. In this case, the accounting profit would be $1 million minus $600,000 minus $150,000 minus $200,000, which equals $50,000.