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 or depreciation charges and no nonoperating income.It had $8,000 of bonds outstanding that carry a 7.5% interest rate,and its combined federal and provincial income tax rate was 40%.How much was the firm's taxable income,or earnings before taxes (EBT)?

Question

Quizplus · Accepted Answer

The firm's taxable income (EBT) is calculated as follows: Sales ($12,500) - Operating costs ($7,250) - Depreciation ($1,250) - Interest on bonds ($8,000 * 7.5% = $600) = $3,400.

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