Asked by Jennifer Zuniga on Jul 15, 2024
Verified
James used $200,000 from his savings account that paid an annual interest of 10% to purchase a hardware store.After one year,James sold the business for 300,000.His accounting profit is:
A) $300,000
B) $100,000
C) $80,000
D) $20,000
Accounting Profit
The difference between total revenue and total expenses when both are measured in accordance with generally accepted accounting principles.
Savings Account
A deposit account held at a financial institution that provides principal security and a modest interest rate.
Annual Interest
The amount of interest due over the course of a year on a loan, deposit, or investment, typically expressed as a percentage of the principal.
- Compute the accounting profit by deducting explicit costs from total revenue.
Verified Answer
RR
Robert RodriguezJul 19, 2024
Final Answer :
B
Explanation :
The accounting profit is calculated as the difference between the revenue and the total expenses. In this case, James only incurred the initial expense of $200,000 to purchase the hardware store.
After one year, he sold the business for $300,000, which means his revenue was $300,000. Therefore, his accounting profit would be:
Accounting Profit = Revenue - Expenses
Accounting Profit = $300,000 - $200,000
Accounting Profit = $100,000
Therefore, the best choice is B, with an accounting profit of $100,000.
After one year, he sold the business for $300,000, which means his revenue was $300,000. Therefore, his accounting profit would be:
Accounting Profit = Revenue - Expenses
Accounting Profit = $300,000 - $200,000
Accounting Profit = $100,000
Therefore, the best choice is B, with an accounting profit of $100,000.
Learning Objectives
- Compute the accounting profit by deducting explicit costs from total revenue.