What is the net profit given the following: sales of 300,000; labor 95,000; miscellaneous expenses 35,000; materials 55,000; depreciation 25,000; and a 35,000 loan to the owner?

What is the net profit given the following: sales of 300,000; labor 95,000; miscellaneous expenses 35,000; materials 55,000; depreciation 25,000; and a 35,000 loan to the owner?

• A. 70,000
• B. 90,000
• C. 120,000
• D. 150,000

Answer: (B)

Net profit is what’s left from sales after subtracting the costs that actually hit the income statement. Include operating costs like labor, miscellaneous expenses, materials, and depreciation. The loan to the owner isn’t an expense; it’s a balance-sheet item (an asset) and doesn’t reduce net profit unless interest is charged. Compute the expenses: 95,000 (labor) + 35,000 (miscellaneous) + 55,000 (materials) + 25,000 (depreciation) = 210,000. Subtract from sales: 300,000 − 210,000 = 90,000. Net profit is 90,000.

Net profit is what’s left from sales after subtracting the costs that actually hit the income statement. Include operating costs like labor, miscellaneous expenses, materials, and depreciation. The loan to the owner isn’t an expense; it’s a balance-sheet item (an asset) and doesn’t reduce net profit unless interest is charged.

Compute the expenses: 95,000 (labor) + 35,000 (miscellaneous) + 55,000 (materials) + 25,000 (depreciation) = 210,000. Subtract from sales: 300,000 − 210,000 = 90,000.

Net profit is 90,000.