Question

Cascade Company was started on January 1, Year 1, when it acquired $161,000 cash from the owners. During Year 1, the company earned cash revenues of $87,500 and incurred cash expenses of $61,200. The company also paid cash distributions of $11,500.

Required
Prepare a Year 1 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions.

Answer 1

The firm's accounting profit is calculated by subtracting total expenses from sales revenue. With the given expenses totaling $950,000 and sales revenue of $1 million, the firm's accounting profit was $50,000.

Step-by-step explanation:

The question provided requires us to calculate the accounting profit for a company. Calculating accounting profit involves subtracting the total expenses from the total sales revenue. In the scenario provided, the firm had sales revenue of $1 million. Expenses were made up of $600,000 spent on labor, $150,000 on capital, and $200,000 on materials. To find the accounting profit, we simply subtract the expenses from the revenue.

Expenses: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000

Sales Revenue: $1,000,000

Accounting Profit = Sales Revenue - Expenses = $1,000,000 - $950,000 = $50,000

Therefore, the firm's accounting profit for last year was $50,000.