Joe quits his computer programming job, where he was earning a salary of $65,000 per year, to start his own computer software business in a building that he owns and was previously renting out for $25,000 per year. In his first year of business he has the following expenses: salary paid to himself, $40,000 ; rent, $0; and other expenses, $35,000. Find the accounting cost and the economic cost associated with Joe's computer software business. (Enter numeric responses using an integer. ) The accounting cost of Joe's business is $ nothing. (Enter your response as an integer. )

Question

Business

Nelson Buck

20 January, 11:49

Joe quits his computer programming job, where he was earning a salary of $65,000 per year, to start his own computer software business in a building that he owns and was previously renting out for $25,000 per year. In his first year of business he has the following expenses: salary paid to himself, $40,000 ; rent, $0; and other expenses, $35,000. Find the accounting cost and the economic cost associated with Joe's computer software business. (Enter numeric responses using an integer. ) The accounting cost of Joe's business is $ nothing. (Enter your response as an integer. )

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Answers (1)

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Royce Chen · Answer 1

The accounting cost and the economic cost associated with Joe's computer software business is $75,00 and the $165,000 respectively.

Explanation:

The computation of the accounting cost and the economic cost is shown below:

Accounting cost = Other Expenses + Salary paid to himself

= $35000 + $40,000

= $75,000

Economic cost = Accounting cost + Salary expense + Rent expenses

= $75,000 + $65,000 + $25,000

= $165,000