Calculate net income based on the following information: sales are $300; cost of goods sold is $190,depreciation expense is $45,interest paid is $20,and the tax rate is 34%.

Question

Quizplus · Accepted Answer

First, we need to calculate the gross profit which is sales minus cost of goods sold:
$300 - $190 = $110

Then, we need to calculate the earnings before interest and taxes (EBIT) by subtracting depreciation expense from gross profit:
$110 - $45 = $65

Next, we need to calculate the earnings before taxes (EBT) by subtracting interest paid from EBIT:
$65 - $20 = $45

Finally, we can calculate net income by multiplying EBT by the tax rate and subtracting that from EBT:
$45 - ($45 * 0.34) = $29.70

Therefore, the net income is $29.70 and the best choice is C.

Calculate Net Income Based on the Following Information: Sales Are