Question

Cain Company reports net cash provided by operating activities of $35,500. It also reports the following information under “Adjustments to reconcile net income to net cash provided by operating activities” on its statement of cash flows (using the indirect method).

Answer 1

The firm's accounting profit is $50,000.

Step-by-step explanation:

The firm's accounting profit is calculated by subtracting the total explicit costs from the total revenues. In this case, the total explicit costs are $600,000 (labor) + $150,000 (capital) + $200,000 (materials)

= $950,000.

The total revenues are $1,000,000. Therefore, the accounting profit is $1,000,000 - $950,000

= $50,000.