During the fiscal year ended 2016, a company had revenues of $400,000, cost of goods sold of $280,000, and an income tax rate of 30 percent on income before income taxes. What was the company's 2016 net income?

Question

Quizplus · Accepted Answer

Net income can be calculated by subtracting the cost of goods sold from revenues and then multiplying the result by (1 - tax rate):

Net income = (revenues - cost of goods sold) x (1 - tax rate)
Net income = ($400,000 - $280,000) x (1 - 0.30)
Net income = $120,000 x 0.70
Net income = $84,000

Therefore, the company's 2016 net income was $84,000. Choice C is the correct answer.

During the Fiscal Year Ended 2016, a Company Had Revenues