A company reports the following amounts at the end of the current year: Sales revenue $ 860,000 Selling expense 250,000 Gain on sale of investments 30,000 Interest expense 10,000 Cost of goods sold 520,000 Under normal circumstances (ignoring tax effects), permanent earnings would be computed as: Multiple Choice

The answer is $80,000

Explanation:

Permanent earnings are permanent. They are constant. They do not change in the nearest future.

Variables to consider in this question are:

Sales revenue - $860,000

Selling expense - $250,000

Interest expense - $10,000

Cost of goods sold - $520,000

Gross profit is Sales - cost of sales (cost of good sold) =

$860,000 - $520,000

=$340,000

Permanent Earnings = Gross profit - Selling expense - interest Expense

$340,000 - $250,000 - $10,000

=$80,000