A seemingly easy finance riddle

[crangston6]

I saw this question elsewhere on the web. I know the "official" answer, though not everyone agrees that is the correct answer. Just want to get everyone's take on it.

Michael owns a shoes store. Each pair of shoes cost Michael $15 to purchase. After a profit margin of $6 added onto it, each pair of shoes is sold at $21.

One day, a customer came in to buy a pair of shoes, and handed Michael a $50 dollar bill.

Michael didn't have enough change, and had to go over to his neighbor to change the 50 dollar bill into bills of different denominations. So after giving the customer the change, and the customer had left, the neighbor came over and claimed that the $50 dollar bill was fake. So Michael had to give the neighbor another $50 dollar bill to settle the dispute.

The question is: how much money did Michael lose at the end of the day?

[The Honest Dollar]

Originally Posted by crangston6

I saw this question elsewhere on the web. I know the "official" answer, though not everyone agrees that is the correct answer. Just want to get everyone's take on it.

Michael owns a shoes store. Each pair of shoes cost Michael $15 to purchase. After a profit margin of $6 added onto it, each pair of shoes is sold at $21.

One day, a customer came in to buy a pair of shoes, and handed Michael a $50 dollar bill.

Michael didn't have enough change, and had to go over to his neighbor to change the 50 dollar bill into bills of different denominations. So after giving the customer the change, and the customer had left, the neighbor came over and claimed that the $50 dollar bill was fake. So Michael had to give the neighbor another $50 dollar bill to settle the dispute.

The question is: how much money did Michael lose at the end of the day?

I think Michael lost $44. He spent $15 to buy the shoes for inventory. He got $50 (fake) from his customer. He gave $50 (fake) to his neighbor and received $50 (real) from his neighbor. He gave $29 to his customer for change. Then he gave $50 to his neighbor to make up for the fake bills. In sum: -15 + 50 - 29 - 50 = -44.

Or, more simply, what he lost was the $15 of shoes (which he gave away for fake money) and the $29 he had to pay back to his neighbor (since he gets to keep the $21 in real money from the original $50 converted to real money to pay for the shoes).

I hope my explanation makes sense.

[lazy23]

I'm not terribly good at math but my friend looking over my shoulder tells me The Honest Dollar is right.

[soupkitchen96]

But if you count lost profits on the shoes he lost $50.

[hollyvangogh]

This reminds me of that old riddle about the three men in a hotel. Does anyone know which one I'm talking about? If you do, post it. It's a tricky one as I recall.

[soupkitchen96]

Paul Michael wrote a blog post about that story.