A firm's financial statements showed sales of 400,000 net income of 50,000 operating expense of 80,000...

A firm's financial statements showed sales of 400,000 net income of 50,000 operating expense of 80,000 accounts payable of 160,000 and a cost of goods sold of 200,000. If the company's tax rate is 28% and the only missing expense is interest, what is the company's interest expense?

Solutions

Expert Solution

Step-1:Calculation of earning before tax

Earning before tax	=	Net Income / (1-Tax rate)
	=	50000/(1-0.28)
	=	$ 69,444.44

Step-2:Calculation of earning before interest and taxes

Sales		$ 4,00,000
Less cost of goods sold		$ 2,00,000
Gross Profit		$ 2,00,000
Less operating expense		$ 80,000
Earning before interest and taxes		$ 1,20,000

Note:
Accounts payable is current liability that is shown in balance sheet , not in income statement.

Step-3:Calculation of interest expense

Interest Expense	=	Earning before interest and Taxes	-	Earning Before Taxes
	=	$ 1,20,000	-	$ 69,444.44
	=	$ 50,555.56

jeff jeffy answered 4 months ago

Next > < Previous

Related Solutions

If net cash flows from operating activities were $187,000, net income were $50,000, and net sales...

If net cash flows from operating activities were $187,000, net income were $50,000, and net sales were $600,000, the cash flow yield would equal (Round to on decimal place) a.$137,000 b.$237,000 c.3.7 times d. $413,000

You look at Company ABC’s financial statements for 2019 and yousee operating income as $50,000....

You look at Company ABC’s financial statements for 2019 and you see operating income as $50,000. Depreciation for the year was $20,000. Interest was $5,000. Capital Expenditure was $10,000. Tax rate is 20%. What is levered cash flow?

You look at Company ABC’s financial statements for 2019 and yousee operating income as $50,000....

A firm's operating income is 500,000 the depreciation on equipment over the last year is 50,000...

A firm's operating income is 500,000 the depreciation on equipment over the last year is 50,000 and the firm's tax rate is 30% fixed assets on the balance sheet increased by 100,000 over the last year. Operating capital has not changed over the last year. What was the capital spending over the last year?

Derrald Company's financial statements show the following items. Sales..................................................................... $200,000 Wage expense......................................................... 80,000 Accounts receivable increase

Derrald Company's financial statements show the following items. Sales..................................................................... $200,000 Wage expense......................................................... 80,000 Accounts receivable increase................................ 36,000 Loss on sale of equipment..................................... 13,000 Rent revenue........................................................... 50,000 Cash collected for rent........................................... 72,000 Dividends (declared and paid)............................... 40,000 Cash paid for wages................................................ 45,000 Depreciation expense............................................ 25,000 Derrald has no other revenues or expenses. What is Derrald’s net cash flow from operating activities? Write the dollar amount of your answer. (Do not write the dollar sign.)

A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000; and gain on...

A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000; and gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities. Select one: a. $155,000. b. $145,800. c. $141,000. d. $139,000. Please Solve As...

A company's income statement showed the following: net income, $135,400; depreciation expense, $32,700, and gain on...

A company's income statement showed the following: net income, $135,400; depreciation expense, $32,700, and gain on sale of plant assets, $15,350. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $10,300; merchandise inventory increased $19,800; prepaid expenses decreased $7,100; accounts payable increased $4,000. Calculate the net cash provided or used by operating activities.

A company's income statement showed the following: net income, $126,000; depreciation expense, $36,000; and gain on...

A company's income statement showed the following: net income, $126,000; depreciation expense, $36,000; and gain on sale of plant assets, $10,000. An examination of the company's current assets and current liabilities showed the following changes accounts receivable decreased $10,600; merchandise inventory increased $24,000; prepaid expenses increased $7,400; accounts payable increased $4,600. Calculate the net cash provided or used by operating activities. Multiple Choice $176,600. $155,400. $148,600. $150,600. $135,800. In preparing a company's statement of cash flows using the indirect method,...

A company's income statement showed the following: net income, $134,000; depreciation expense, $40,000; and gain on...

A company's income statement showed the following: net income, $134,000; depreciation expense, $40,000; and gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $11,400; merchandise inventory increased $28,000; prepaid expenses increased $8,200; accounts payable increased $5,400. Calculate the net cash provided or used by operating activities. Multiple Choice $140,600. $183,000. $157,000. $155,000. $161,800.

A company's income statement showed the following: net income, $127,000 and depreciation expense, $30,900. An examination...

A company's income statement showed the following: net income, $127,000 and depreciation expense, $30,900. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $9700; merchandise inventory increased $18,600; and accounts payable increased $3700. Calculate the net cash provided or used by operating activities.

Subjects