Question

Barbor agreed to the January 2 delivery, at which time we billed them for the order. I recorded the remaining balance of the order ($13,100) as sales and accounts receivable on December 28 in the current year-end financial statements. The sofas, which have a cost of $920 each, were excluded from the ending inventory count that was performed and completed on December 31.

Answer 1

The accounting profit is calculated by subtracting explicit costs from total revenues. For the firm mentioned, the accounting profit is $50,000, obtained after subtracting total expenses of $950,000 from sales revenue of $1 million.

Step-by-step explanation:

The subject in question pertains to the calculation of accounting profit, which is a fundamental concept in financial accounting. Accounting profit is determined by subtracting explicit costs from total revenues. In the provided self-check question, a firm had sales revenue of $1 million.

This firm incurred three major types of expenses: labor ($600,000), capital ($150,000), and materials ($200,000). Therefore, to calculate the firm's accounting profit, you subtract the sum of these expenses from the total sales revenue.

Here's the step-by-step calculation:

1. Sum the expenses: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000.
2. Subtract the total expenses from the sales revenue: $1,000,000 - $950,000 = $50,000.

The firm's accounting profit for last year would therefore be $50,000.