Scenario 9.1
Jane left her job at Siemens and started her own boutique. She used to earn $50,000 annually at Siemens. She took a loan of $10,000 and used $20,000 from her personal savings to begin her venture. She agreed to repay the loan with 10% interest. Her business is bringing in $80,000 annually. She has rent and labor expenses of $15,000. Also assume that Jane could have used her own money i.e. $20,000 to buy stocks in Intel which would have returned 5% to her last year.
-Refer to Scenario 9.1 and calculate Jane's accounting profit.
A)$50,000
B)$65,000
C)$80,000
D)$64,000
E)$35,000

Question

Quizplus · Accepted Answer

Jane's revenue is $80,000 and her expenses (rent and labor) are $15,000. Therefore, her accounting profit is $65,000 ($80,000 - $15,000). We do not need to consider the loan and interest or the potential return from investing in Intel as they are not relevant to calculating her accounting profit.

Scenario 9.1 Jane Left Her Job at Siemens and Started Her Own