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Week 7: Homework
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Mc
Graw
Hill
Net sales
Expenses:
VIDEO PHONES, INC.
Income Statement
For the Year Ended December 31, 2021
Cost of goods sold
Operating expenses
Depreciation expense
Loss on sale of land
Interest expense
Income tax expense
Total expenses
Net income
Assets
Current assets:
Cash
Accounts receivable
Inventory
Prepaid rent
Long-term assets:
Investments
Land
Equipment
Accumulated depreciation
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts navahle
Search
$2,050,000
878,000
29,000
8,200
16,000
50,000
$3,136,000
Saved
3,031, 200
$ 104,800
VIDEO PHONES, INC.
Balance Sheets
December 31
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4 of 4
2021
$ 179,720
83,200
105,000
12,480
107,000
212,000
274,000
(71,400)
$902,000
$ 67 800
$160,760
62,000
137,000
6,240
2020
244,000
212,000
(42,400)
0
$779,600
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FERRE
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Answer 1

A firm's accounting profit is calculated by subtracting explicit costs such as labor, capital, and materials from its total revenue. In the given example, with a revenue of $1 million and expenses totaling $950,000, the firm's accounting profit would be $50,000.

Step-by-step explanation:

The concept of accounting profit is represented by the total revenues minus the explicit costs, which are the direct costs of producing goods or providing services. For instance, if a firm had sales revenue of $1 million and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be calculated as follows:

Accounting profit = Revenue - (Labor Costs + Capital Costs + Materials Costs)

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

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

= $50,000

This demonstrates that the firm's accounting profit is $50,000 after subtracting all explicit costs from the total revenue.