Final answer:
The correct answer is option b. The correct journal entry to record the purchase of a food truck with cash is a debit to the Food Truck account for $27,000 and a credit to the Cash account for $27,000. This accounts for the asset increase and the cash outflow. The accounting profit example calculation is $50,000.
Step-by-step explanation:
The student's question involves recording the purchase of an asset, specifically a food truck, in the accounting records of a business. According to the information provided, the food truck was purchased with cash, and thus the journal entry would require debiting the asset account and crediting the cash account to reflect the outflow of cash. The correct journal entry would be:
- Debit: Food Truck $27,000
- Credit: Cash $27,000
This entry shows that the business has increased its assets through the purchase of the food truck, and decreased its cash by the same amount. The purchase price of the food truck is the relevant figure for this entry, and it is not affected by the truck's salvage value or useful life for the initial purchase entry.
As for the self-check question, the firm's accounting profit can be determined by subtracting the total expenses (labor, capital, and materials) from the sales revenue. The total expenses sum up to $950,000 ($600,000 + $150,000 + $200,000), and when this is subtracted from the sales revenue of $1 million, the firm's accounting profit is $50,000.