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: Flex 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

A store sells about 360 calculators peryear. It would cost the store $8 to store one...

Basic Math
Q

As the new owner of a supermarket, you have inherited a large inventory of unsold imported...

Advance Math
Q

The magnetic susceptibility of diamagnetic materials is nearly independent of temperature, but this is not so...

Physics
Q

One way to demonstrate to a potential robber that Dollar General employees care about their...

Biology
Q

Write a rule to describe the transformation X M M R OA rotation 90 clockwise...

Basic Math
Q

A computer selects a number X from 2 to 9 randomly and uniformly Round all...

Statistics
Q

Question Find the third degree polynomial function that has zeros 2 and 15i and a...

Calculus
Q

Please answer all the question. The following...

Accounting
Q

Saved QS 7-8 (Algo) Percent of accounts receivable method LO P3 Warner Company's year-end unadjusted...

Accounting
Q

Donald's production for the day was 1300 units

Accounting
Q

ework i nces A Cash Accounts receivable Office supplies Office equipment Land Assignments: (Summer 2023)...

Accounting
Q

Tom purchased a 7-year asset for his business in February, 2020 for $4,500 and used...

Accounting