Question

In: Finance

Stein Books Inc. sold 1,900 finance textbooks for $250 each to High Tuition University in 20X1....

Stein Books Inc. sold 1,900 finance textbooks for $250 each to High Tuition University in 20X1. These books cost $210 to produce. Stein Books spent $12,200 (selling expense) to convince the university to buy its books.

Depreciation expense for the year was $15,200. In addition, Stein Books borrowed $104,000 on January 1, 20X1, on which the company paid 12 percent interest. Both the interest and principal of the loan were paid on December 31, 20X1. The publishing firm's tax rate is 30 percent.

Did Stein Books make a profit in 20X1? Please verify with an income statement.

Solutions

Expert Solution

INCOME STATEMENT Units   Rate Amount
Sales                1,900 $              250 $     475,000
Less: Cost of Goods Sold                1,900 $              210 $     399,000
Gross Revenue $        76,000
Less: Operating Expenses
Selling Expenses $        12,200
Depreciation $        15,200
Interest ($ 104,000 X 12%) $        12,480
Net income before tax $        36,120
Less: Tax @ 30% = $        10,836
Net income after tax $        25,284
Answer = Yes Stein make a profit of $ 25,284 in the year

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