Question

Bulldozer Mining Inc. recently reported $350,000 of sales, $80,000 of operating costs other than depreciation, and $10,000 of depreciation. The company had $18,500 of outstanding bonds that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 35%. How much was the firm’s net income? The firm uses the same depreciation expense for tax and stockholder reporting purposes.

Answer 1

Answer:

Explanation:

                                                                     $

Sales                                                         350,000

Operating costs                                        (80,000)

Depreciation                                              (10,000)

Profit before Interest & Tax                       260,000

Interest charge @ 6.5%                             (    1,203)

Profit before Tax                                          258,797

Tax @ 35%                                                   (  90,579)

Net Income                                                   168,218

I