Megan Used to Work at the Local Pizzeria for $15,000

question 131

Multiple Choice

Megan used to work at the local pizzeria for $15,000 per year but quit to start her own deli.To buy the necessary equipment,she withdrew $20,000 from her inheritance (which paid 8 percent interest) .Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000.She asked her dad the accountant and her mom the economist to calculate her annual profit for her.

• A)Dad says she lost $11,000 and Mom says she lost $26,000.
• B)Dad says her profit is $31,000 and Mom says her profit is $16,600.
• C)Dad says her profit is $9,000 and Mom says she lost $6,000.
• D)Dad says her profit is $19,000 and Mom says her profit is $2,400.

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Definitions:

Ending Inventory

Ending inventory is the total value of all inventory, including raw materials, work-in-progress, and finished goods, that a company has at the end of an accounting period.

FOB Destination

A shipping term indicating that the seller bears delivery costs and risks until the goods reach the buyer's specified location.

Perpetual Inventory System

A perpetual inventory system continuously updates the record of inventory with each sale or purchase, providing real-time data on the inventory levels.

Merchandise

Goods procured by a business for the purpose of resale to customers.