Question

On December 5 received $4,800 in advance for accounting services to be performed during next 12 months. As of December 31, we have earned 1/12 of the fees. Give the adjusting entry at December 31?

Answer 1

The firm's accounting profit is $50,000.

Step-by-step explanation:

The firm's accounting profit can be calculated by subtracting the explicit costs from the total revenues. In this case, the firm's total revenues were $1 million, and the explicit costs included labor ($600,000), capital ($150,000), and materials ($200,000). So, the accounting profit is $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.