Question

Herc Co.'s inventory at December 31, 2016, was $1,500,000 based on a physical count priced at cost, and before any necessary adjustment for the following:

Merchandise costing $90,000, shipped f.o.b shipping point from a vendor on December 30, 2016, was received and recorded on January 5, 2017.
Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2017. The goods, billed to the customer f.o.b. shipping point on December 30, 2016, had a cost of $120,000.
What amount should Herc report as inventory in its December 31, 2016, balance sheet?
a) $1,500,000
b) $1,590,000
c) $1,700,000
d) $1,710,000

Answer 1

An accounting profit is calculated by subtracting all costs from the sales revenue. For a firm with $1 million in sales and $950,000 in combined labor, capital, and material costs, the accounting profit would be $50,000.

Step-by-step explanation:

Calculating Accounting Profit

The subject of the question is related to accounting, specifically the calculation of accounting profit for Herc Co.'s inventory at the end of the year. However, the question seems to be incomplete, as it only provides a figure for inventory without any additional items to adjust. In the context of the provided self-check questions, to calculate a firm's accounting profit, we subtract the total costs from the sales revenue.

Using the information from the self-check questions, we have:

• Sales Revenue: $1,000,000
• Labor Costs: $600,000
• Capital Costs: $150,000
• Material Costs: $200,000

Accounting Profit = Sales Revenue - (Labor Costs + Capital Costs + Materials Costs)
= $1,000,000 - ($600,000 + $150,000 + $200,000)
= $1,000,000 - $950,000
= $50,000.

The accounting profit for this firm would therefore be $50,000.