Question
In: Finance
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2. For the sake of simplicity, you are the only shareholder who owns this corporation. You also decide to take on $10,000 liabilities with 20% annual interest rate. You spend $6,000 cash to buy books as the inventory. Throughout the year, you sell half of books to students in exchange for $9,000 cash, that is, your revenue is $9,000 and COGS is $3,000. Also, $2,000 cash dividend is paid at the end of the year. Tax rate is 40%.
All entries of balance sheet are zero at the beginning of the year (Jan. 1).
What is net income during the year?
Solutions
Expert Solution
Answer : Below is the Table showing Calculation of Net Income :
| Amount | |
| Sales | 9000 |
| Less :Cost of Goods Sold | 3000 |
| Gross Profit | 6000 |
| Earning Before Tax (EBT) | 6000 |
| Income Tax (40%) | 2400 |
| Net Income | 3600 |
| Common Stock Dividend Paid | 2000 |
| Addition to retained Earning | 1600 |
jeff jeffy answered 2 years agoRelated Solutions
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
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