The income statement of Berrima Barbed Wire Ltd is:
- If salaries expense amounting to $3000 were eliminated,what would be the effect on net profit after tax?
A) It would decrease by $2100.
B) It would decrease by $3000.
C) It would increase by $2100.
D) It would increase by $3000.

Question

The income statement of Berrima Barbed Wire Ltd is: 
- If salaries expense amounting to $3000 were eliminated,what would be the effect on net profit after tax?
A) It would decrease by $2100. 
B) It would decrease by $3000. 
C) It would increase by $2100. 
D) It would increase by $3000.

Quizplus · Accepted Answer

Eliminating a salaries expense of $3000 would reduce the total expenses, thereby increasing the net profit. Assuming a tax rate (not provided in the question), the increase in net profit would be less than $3000 due to taxes on the additional profit. Without the specific tax rate, the closest correct option is an increase by some amount, which is option C, assuming a typical tax scenario where the net increase is less than the gross due to taxation.

The Income Statement of Berrima Barbed Wire Ltd Is