Sam quit a $30,000-a-year job with a local heating and air conditioningfirm to go into business for himself. After his first year in business, his accountant showed him an income statement, which indicated Sam’s firmhad a profit of $40,000. During this year, Sam drew a salary of $20,000.a. What were Sam’s accounting profit and entrepreneurial profit?b. Explain the difference between accounting profit and entrepreneurial profit.
Sam quit a $30,000-a-year job with a local heating and air conditioningfirm to go into business for himself. After his first year in business, his accountant showed him an income statement, which indicated Sam’s firmhad a profit of $40,000. During this year, Sam drew a salary of $20,000.a. What were Sam’s accounting profit and entrepreneurial profit?b. Explain the difference between accounting profit and entrepreneurial profit.
Chapter15: Taxing Business Income
Section: Chapter Questions
Problem 3DQ
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Question
Sam quit a $30,000-a-year job with a local heating and air conditioning
firm to go into business for himself. After his first year in business, his accountant showed him an income statement, which indicated Sam’s firm
had a profit of $40,000. During this year, Sam drew a salary of $20,000.
a. What were Sam’s accounting profit and entrepreneurial profit?
b. Explain the difference between accounting profit and entrepreneurial profit.
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ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT