Question

The following data were taken from the records of Township Corporation at December 31 of the current year: Sales revenue $ 90,000 Gross profit 37,000 Selling (distribution) expense 5,700 Administrative expense ? Pretax income 13,800 Income tax rate 35% Shares of stock outstanding 2,800

Answer 1

Answer:

Administrative expense = $17,500

Explanation:

Administrative expense is classified as operating expense. It will be deducted from the gross profit to calculate the Pretax Income.

Sales revenue                            $90,000

Gross profit                                 $37,000

Selling (distribution) expense   ($5,700)

* Administrative expense        ($17,500)

Pretax income                            $13,800

Income tax rate 35%                 ($4,830)

After Tax Income                        $8,970

Shares of stock outstanding 2,800

Pretax income is calculated as follow

Pretax Income = Gross profit - Selling (distribution) expense - Administrative expense

$13,800 = $37,000 - $5,700 - Administrative expense

$13,800 = $31,300 - Administrative expense

Administrative expense = $31,300 - $13,800

Administrative expense = $17,500