Question

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

Answer 1

Answer:

If the company budgets 40% for income tax expense, the budgeted net income will be $16,002

Explanation:

Total expense of the company = COGS + Depreciation expense + Interest expense + Other expenses = $48,500 + $1,500 + $250 + $41,880 = $92,130

Pretax income = Sales - Total expense = $118,800 - $92,130 = $26,670

Income tax expense = $26,670 x 40% = $10,668

The budgeted net income = Pretax income - Income tax expense = $26,670 - $10,668 = $16,002