Question

Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, and a tax rate of 21 percent. What is the net income for this firm

Answer 1

Answer:

Net Income = $310,470

Explanation:

Given:

Sales during the year = $796,000

Cost of goods sold = $327,000

Depreciation expenses = $42,000

Interest expense = $34,000

Tax rate = 21%

Net income during the year = ?

Computation of net income:                  

Particular                               Amount

Sale value                            $796,000

Less: Cost                            $327,000

Less: Depreciation              $42,000

Less: Interest expense        $34,000  

Gross profit                         $393,000

Less: Tax 21% of G.P            $82,530  

Net Income                          $310,470

Therefore, net income for the firm is $310,470

Answer 2

Answer:

The correct answer is $310,470.

Explanation:

According to the scenario, the computation of the given data are as follows:

First we calculate gross profit:

Gross profit = Sales - Cost of Goods Sold = $796,000 - $327,000 = $469,000

Now, Earnings Before Tax = Gross profit - Depreciation - Interest

= $469,000 - $42,000 - $34,000 = $393,000

So, Net income = Earnings Before Tax - Tax percent on EBT

= $393,000 - 21% × $393,000

= $393,000 - $82,530

= $310,470