Mason Construction Inc.had net sales of $480,000,costs of sales of $130,000,additional expenses of $200,000,depreciation of $40,000,and a tax rate of 30%.Use this information to determine the firm's after tax earnings on a cash basis.
A)$77,000
B)$105,000
C)$117,000
D)$145,000

Question

Quizplus · Accepted Answer

To calculate after-tax earnings on a cash basis, first find the earnings before tax (EBT) by subtracting costs of sales, additional expenses, and depreciation from net sales: $480,000 - $130,000 - $200,000 - $40,000 = $110,000. Then, calculate taxes: $110,000 * 30% = $33,000. Subtract taxes from EBT to get after-tax earnings: $110,000 - $33,000 = $77,000. Finally, add back depreciation (a non-cash expense) to get cash basis earnings: $77,000 + $40,000 = $117,000.