During 2018 a company makes cash sales of $900 000. It pays $300 000 in expenses and owes $90 000 for services it received in 2018 but are payable in 2019. It pays $170 000 in dividends. What is the profit for 2018?

Question

Quizplus · Accepted Answer

Profit = Revenue - Expenses

Revenue = Cash Sales = $900,000

Expenses = $300,000

Therefore, Profit before adjusting for outstanding payable = $600,000 ($900,000 - $300,000)

However, the company also owes for services in 2018 that are payable in 2019.

This means that $90,000 of the expenses are related to these services and should not be included in the calculation for profits.

Adjusted Profit = Profit before adjusting for outstanding payable - Outstanding Payable + Dividends

Adjusted Profit = $600,000 - $90,000 + $170,000

Adjusted Profit = $680,000

Therefore, the profit for 2018 is $680,000, which is closest to option B) $510,000.

During 2018 a Company Makes Cash Sales of $900 000