Question

Meric Mining Inc. recently reported $15,000 of sales, $7,500 of operating costs other than depreciation, and $1,200 of depreciation. The company had no amortization charges, it had outstanding $6,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much was the firm's net income after taxes

Answer 1

Answer:

The firm's net income after taxes is $3,830.94.

Explanation:

Net income after taxes refers to the net income obtained after relevant taxes have been deducted from income before taxes. This can be calculated for Meric Mining Inc. by preparing an income statement as follows:

Meric Mining Inc.

Income statement

For the period .....

Particulars                                                      $            

Sales                                                         15,000.00

Operating costs                                       (7,500.00)

Depreciation                                             (1,200.00)  

Income before in interest and taxes       6,300.00

Interest on bond ($6,500 * 6.25%)           (406.25)  

Net Income before taxes                         5,893.75

Taxes ($5,893.75 * 35%)                         (2,062.81)  

Net income after taxes                           3,830.94  

Therefore, the firm's net income after taxes is $3,830.94.