Final answer:
Shaw Company needs to debit the supplies inventory account and credit the supplies expense account with $2,050 to adjust for the ending inventory. For the firm with $1 million in sales and expenses totaling $950,000, the accounting profit equals $50,000.
Step-by-step explanation:
When Shaw Company records their supplies as an expense but has supplies remaining at the end of the period, an adjusting journal entry is needed to account for supplies on hand. To make the adjusting entry for the ending inventory of supplies worth $2,050, the company should debit the supplies inventory account and credit the supplies expense account with the ending inventory amount. This reflects that the supplies are not an expense until they are used.
Similarly, if a firm had sales revenue of $1 million last year and incurred $600,000 on labor, $150,000 on capital, and $200,000 on materials, the accounting profit would be the sales revenue minus these expenses. Therefore, the firm's accounting profit would be $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.