For the past year, Momsen, Ltd., had sales of $46,382, interest expense of $3,854, cost of goods sold of $16,659, selling and administrative expense of $11,766, and depreciation of $6,415. If the tax rate was 35 percent, what was the company's net income?

Question

Juliette Brennan

Business

18 December, 04:13

For the past year, Momsen, Ltd., had sales of $46,382, interest expense of $3,854, cost of goods sold of $16,659, selling and administrative expense of $11,766, and depreciation of $6,415. If the tax rate was 35 percent, what was the company's net income?

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Answers (1)

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Steve Bates · Answer 1

Net income = $11,412.2

Explanation:

Giving the following information:

sales of $46,382

interest expense of $3,854

cost of goods sold of $16,659

selling and administrative expense of $11,766

depreciation of $6,415

t=0.35

We need to use the following formula:

Net income = (sales - COGS - selling and administrative expense - interest expense - depreciation) - tax + depreciation

First, we deduct Depreciation to decrease the tax base, but because it is not an actual payment, we have to sum it after tax.

Sales = 46,382

COGS = (16,659)

Gross profit = 29,723

Selling and administrative expense = (11,766)

Interest = (3,854)

Depreciation = (6,415)

EBT = 7,688

Tax = (7,688*0.35) = (2,690.8)

Depreciation = 6,415

Net income = $11,412.2