Federal Income Tax: United Brands Corp. just completed their latest fiscal year. The firm had sales of $16,650,000. Depreciation and amortization was $832,500, interest expense for the year was $825,000, and selling general and administrative expenses totaled $1,665,000 for the year, and cost of goods sold was $9,990,000 for the year. Assuming a federal income tax rate of 34%, what was the United Brands net income after-tax?

Question

Quizplus · Accepted Answer

First, calculate the earnings before interest and taxes (EBIT) by subtracting operating expenses from sales:
$16,650,000 - $9,990,000 - $832,500 - $1,665,000 = $4,162,500.

Then, subtract the interest expense to get earnings before taxes (EBT): 
$4,162,500 - $825,000 = $3,337,500.

Finally, multiply EBT by the tax rate to get net income after tax: 
$3,337,500 x 0.34 = $1,134,750 
$3,337,500 - $1,134,750 = $2,202,750.

Therefore, the correct answer is A) $2,202,750.