Scenario 22.1 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 22.1 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 accounting profit can be calculated as:
Revenue - Expenses = Accounting Profit
$80,000 - ($15,000 + $10,000 + ($20,000 x 0.1)) = $64,000
So, Jane's accounting profit is $64,000. This takes into account her revenue of $80,000 and her expenses of $15,000 for rent and labor, as well as the cost of her loan at 10% interest. It does not include the opportunity cost of not investing her personal savings into Intel stocks, as this is not a direct expense for her business.