Frederickson Office Supplies recently reported $12,500 of sales,$7,250 of operating costs other than depreciation,and $1,250 of depreciation.The company had no amortization charges and no non-operating income.It had $8,000 of bonds outstanding that carry a 7.5% interest rate,and its federal-plus-state income tax rate was 40%.How much was the firm's taxable income,or earnings before taxes (EBT)?

Question

Quizplus · Accepted Answer

To find the taxable income (EBT), subtract operating costs, depreciation, and interest from sales:  Sales: $12,500  Operating costs: $7,250  Depreciation: $1,250  Interest: $8,000 * 7.5% = $600  EBT = Sales - Operating Costs - Depreciation - Interest  EBT = $12,500 - $7,250 - $1,250 - $600 = $3,400

Frederickson Office Supplies Recently Reported $12,500 of Sales,$7,250 of Operating