Question

What amount of gain or loss would Instrument Corporation report in its income statement for the year ended December 31, 2019 related to its investment?

1) $240,000 gain.
2) $60,000 gain.
3) $300,000 gain.
4) $60,000 loss.

Answer 1

The accounting profit for a firm with $1 million in sales revenue and expenses totaling $950,000 (labor, capital, and materials) would be $50,000. This is calculated by subtracting explicit costs from the total revenues.

Step-by-step explanation:

Understanding Accounting ProfitWhen trying to determine the gain or loss reported on an income statement, it is important to understand the concept of accounting profit. Given information about a firm’s sales revenue and explicit costs such as labor, capital, and materials, we can calculate the firm's accounting profit. For instance, if a firm had sales revenue of $1 million last year and had expenses amounting to $600,000 for labor, $150,000 for capital, and $200,000 for materials, the accounting profit would be calculated as follows:Accounting Profit = Total Revenues - Explicit Cost= $1,000,000 - ($600,000 + $150,000 + $200,000= $1,000,000 - $950,00= $50,00

This firm would report an accounting profit of $50,000 for the year.In order to determine the gain or loss related to Instrument Corporation's investment, we need more information about the investment and the transactions that occurred. The given options do not provide enough context to accurately calculate the gain or loss. However, in general, to calculate the gain or loss on an investment, you subtract the original cost of the investment from the final proceeds received when the investment is sold or disposed of.