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During the year ended December 31, 2018, Pistol Pete’s Pizza Parlor reported $10,000 sales, $6,000 operating...

During the year ended December 31, 2018, Pistol Pete’s Pizza Parlor reported $10,000 sales, $6,000 operating costs other than depreciation, and $2,000 depreciation. The company had no amortization expense and no non-operating income. It had previously issued $6,000 of bonds that pay an 8.5% interest rate. Pete’s federal plus state income tax rate is 40%. What was the company’s taxable, or earnings before taxes (EBT)?

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Expert Solution

Interest = 6000*8.5% = 510

EBT = sales - operating costs - depreciation - interest

= 10,000 - 6000 - 2000 - 510

= $1490

jeff jeffy answered 2 years ago
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