Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a firm's financial statements showed sales of 400,

A firm's financial statements showed sales of 400,000 net income of 50,000 operating expense of 80,000...

Free

70.2K

Verified Solution

Question

Finance

A firm's financial statements showed sales of 400,000 net incomeof 50,000 operating expense of 80,000 accounts payable of 160,000and a cost of goods sold of 200,000. If the company's tax rate is28% and the only missing expense is interest, what is the company'sinterest expense?

Answer & Explanation Solved by verified expert
3.7 Ratings (675 Votes)

Step-1:Calculation of earning before tax
Earning before tax = Net Income / (1-Tax rate)
= 50000/(1-0.28)
= $     69,444.44
Step-2:Calculation of earning before interest and taxes
Sales $       4,00,000
Less cost of goods sold $       2,00,000
Gross Profit $       2,00,000
Less operating expense $           80,000
Earning before interest and taxes $       1,20,000
Note:
Accounts payable is current liability that is shown in balance sheet , not in income statement.
Step-3:Calculation of interest expense
Interest Expense = Earning before interest and Taxes - Earning Before Taxes
= $       1,20,000 - $ 69,444.44
= $     50,555.56

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

A firm's financial statements showed sales of 400,000 net incomeof 50,000 operating expense of 80,000 accounts payable of 160,000and a cost of goods sold of 200,000. If the company's tax rate is28% and the only missing expense is interest, what is the company'sinterest expense?

Other questions asked by students

Q

brandon wishes to accumulate 100,000 by making level monthly end of month deposits for 30 years...

Finance
Q

The normal distribution is a special distribution of quantitative data that has a symmetric Bell-shape. Data, such...

Basic Math
Q

) The ileac blade provides attachment areas for the Gluteus medius and Gluteus minimus muscles.  They “originate” here;...

Medical Sciences
Q

You want to identify the purpose of a malware and possible damages that it has done...

Programming
Q

Discuss the overall effectiveness of school counseling . Expand upon your answer by pointing out some...

Psychology
Q

The calculated X value way of freedom chart as seen on the right Unless in...

Biology
Q

Find a subset of the vectors that forms a basis for the space spanned by...

Algebra
Q

5 Rewrite the following expression as a fraction times the variable 7a

Algebra
Q

Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, had arranged...

Accounting
Q

T or F? When an asset is sold and its book value exceeds its selling...

Accounting
Q

Bims Corporation uses the weighted-average method in its process costing system. The Assembly Department started...

Accounting
Q

Prepare a statement of cash flows, using the indirect method of presenting cash flows from...

Accounting