Question

John fishes for a living. Last year, he sold $100,000 of fish. Bait, nets and other fishing supplies cost John $10,000 and he paid $40,000 in salaries to his helpers. Depreciation on his boat and other equipment, as calculated using IRS rules, was $15,000. What was John's profit as would be calculated by an accountant

Answer 1

$35,000

Step-by-step explanation:

John's accounting profit = total revenue - actual expenses (opportunity costs not included)

• total revenue = $100,000
• actual expenses = $10,000 (fishing supplies) + $40,000 (salaries) + $15,000 (depreciation) = $65,000

accounting profit = $100,000 - $65,000 = $35,000