Gomez runs a small pottery firm. He hires one helper at $15,500 per year, pays annual rent of $5,500 for his shop, and spends $21,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $6,500 per year if alternatively invested. He has been offered $20,500 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $7,000 per year. Total annual revenue from pottery sales is $87,000. Instructions: Enter your answers as whole numbers. a. Calculate the accounting profit for Gomez's pottery firm. b. Now calculate Gomez's economic profit.

Gomez runs a small pottery firm. He hires one helper at $15,500 per year, pays annual rent of $5,500 for his shop, and spends $21,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $6,500 per year if alternatively invested. He has been offered $20,500 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $7,000 per year. Total annual revenue from pottery sales is $87,000. Instructions: Enter your answers as whole numbers. a. Calculate the accounting profit for Gomez's pottery firm. b. Now calculate Gomez's economic profit.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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