Elgin Battery Manufacturers had sales of $1,000,000 in 2009 and their cost of goods sold represented 70 percent of sales. Selling and administrative expenses were 10 percent of sales. Depreciation expense was $100,000 and interest expense for the year was $10,000. The firm's tax rate is 30 percent. What is the dollar amount of taxes paid?

Question

Quizplus · Accepted Answer

First, we need to calculate the earnings before taxes (EBT):
Sales = $1,000,000
Cost of goods sold = 70% of sales = $700,000
Selling and administrative expenses = 10% of sales = $100,000
Depreciation expense = $100,000
Interest expense = $10,000
EBT = Sales - Cost of goods sold - Selling and administrative expenses - Depreciation expense - Interest expense
EBT = $1,000,000 - $700,000 - $100,000 - $100,000 - $10,000 = $90,000
Next, we can calculate the taxes paid:
Taxes paid = EBT x Tax rate
Taxes paid = $90,000 x 0.30 = $27,000
Therefore, the correct answer is C.

Elgin Battery Manufacturers Had Sales of $1,000,000 in 2009 and Their