Adam Is the Owner/operator of a Flower Shop

question 45

Multiple Choice

Adam is the owner/operator of a flower shop.Last year he earned $250,000 in total revenue.His explicit costs were $175,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources) .During the year he received three offers to work for other flower shops with the highest offer being $75,000 per year.Which of the following is true about Adam's accounting and economic profit?

• A)Accounting profit = $75,000;economic profit = $0.
• B)Accounting profit = $175,000;economic profit = $75,000.
• C)Accounting profit = $75,000;economic profit = negative $100,000.
• D)Accounting profit = $0;economic profit = negative $75,000.

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Definitions:

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Statement of Cash Flows

A financial document that provides detailed information about the cash inflows and outflows for a business over a specific period of time.

Operating

Pertaining to the core activities necessary for a business to function, including production, sales, and distribution.

Financing

The process of providing or securing funds for business activities, making purchases, or investing.