Question

holloway company earned $7,800 of service revenue on account during year 1. the company collected $6,630 cash from accounts receivable during year 1.

Answer 1

To calculate accounting profit, explicit costs are subtracted from total revenues. In this case, the firm's accounting profit for the last year was $50,000 after deducting costs for labor, capital, and materials from its $1 million in sales revenue.

Step-by-step explanation:

Calculating Accounting Profit

The question refers to the calculation of accounting profit for a company. To find the accounting profit, one must subtract the explicit costs from the total revenues. In the given scenario, the firm had a sales revenue of $1 million. The expenses were as follows: $600,000 on labor, $150,000 on capital, and $200,000 on materials. The calculation for accounting profit is:

Total Revenues - Explicit Costs = Accounting Profit

$1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000

Therefore, the firm's accounting profit last year was $50,000.