Question

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be

Answer 1

Answer: Amount of budgeted income tax expense = $10,668

Explanation:

Given:

Sales = $118,800

COGS = $48,500

Depreciation expense = $1,500

Interest expense = $250

Other expenses = $41,880

We'll compute the amount of budgeted income tax expense using the following formula:

Amount of budgeted income tax expense = 40% of (Sales - COGS - Depreciation expense - Interest expense - Other expenses)

= $118,800 - $48,500 - $1,500 - $250 - $41,880

= 40% x $26,670  

= $10,668