Monday 9 September 2013

Draiman, Inc., has sales of $599,000, costs of $259,000, depreciation expense of $64,000, interest expense of $31,000, and a tax rate of 30 percent. (Enter your answer as directed, but do not round intermediate calculations.) Required: What is the net income for this firm? Net income $ Explanation: The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get: Income statement Sales $ 599,000 Costs 259,000 Depreciation 64,000 EBIT $ 276,000 Interest 31,000 Taxable income $ 245,000 Taxes (30%) 73,500 Net income $ 171,500

Draiman, Inc., has sales of $599,000, costs of $259,000, depreciation expense of $64,000, interest expense of $31,000, and a tax rate of 30 percent. (Enter your answer as directed, but do not round intermediate calculations.)

Required:
What is the net income for this firm?

  Net income $  


Explanation:
The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get:

 Income statement
  Sales $ 599,000  
  Costs   259,000  
  Depreciation   64,000  
 

  EBIT $ 276,000  
  Interest   31,000  
 

  Taxable income $ 245,000  
  Taxes (30%)   73,500  
 

  Net income $ 171,500  
 




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