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. The sell

Answer 1

The accounting profit for the firm, after deducting total expenses of $950,000 from the sales revenue of $1 million, is $50,000.

Step-by-step explanation:

The student has asked a question related to accounting practices, specifically calculating the accounting profit for a firm. After analyzing the data provided, the firm's accounting profit can be determined by subtracting explicit costs from total revenues. With a sales revenue of $1 million and expenses of $600,000 on labor, $150,000 on capital, and $200,000 on materials, the calculated accounting profit would be as follows:

Calculation of Accounting Profit

Accounting profit = Total revenues minus explicit costs
= $1,000,000 - ($600,000 + $150,000 + $200,000)
= $1,000,000 - $950,000
= $50,000