Sam quit his job as an accountant with We Keep Books Accurately to open his own accounting firm. He earned $40,000 with the accounting firm We Keep Books Accurately. During the current year, Sam had revenues of $150,000 and total expenses of $110,000. Sam earned an:
a. accounting profit of $40,000.
b. accounting profit of $40,000 and an entrepreneurial profit of $40,000.
c. entrepreneurial profit of $40,000, but had an accounting loss.
d. entrepreneurial profit of $40,000.
e. both a and d above are correct.
The solution explains how to calculate accounting and entrepreneurial profit.