Question

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Packard Company engaged in the following transactions during 2015, its first year in operations: (Assume all transactions are cash transactions.)
1) Acquired $1,400 cash from the issue of common stock.
2) Borrowed $870 from a bank.
3) Earned $1,050 of revenues.
4) Paid expenses of $340.
5) Paid a $140 dividend.
During 2016, Packard engaged in the following transactions: (Assume all transactions are cash transactions.)
1) Issued an additional $775 of common stock.
2) Repaid $535 of its debt to the bank.
3) Earned revenues of $1,200.
4) Incurred expenses of $540.
5) Paid dividends of $190.
The amount of assets on Packard's 2016 balance sheet is
-$710.
-$3,550.
-$3,740.
-$660.

Answer 1

The accounting profit of the firm is $50,000.

Step-by-step explanation:

To determine the accounting profit of a firm, we need to subtract the expenses from the sales revenue. In this case, the firm had sales revenue of $1 million and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials. Therefore, the accounting profit can be calculated as follows:

Accounting profit = Sales revenue - Expenses

= $1,000,000 - ($600,000 + $150,000 + $200,000)

= $1,000,000 - $950,000

= $50,000

So, the firm's accounting profit is $50,000.