Question

Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)

Answer 1

Answer:

Earnings Before Tax   =   $7,870

Explanation:

given data

sales = $15,500

operating costs = $8,250

depreciation = $1,750

bonds outstanding = $9,000

interest rate = 7%

federal-plus-state income tax rate = 40%

solution

foe Earnings Before Tax that is here we ignore tax rate so  

Earnings Before Tax   =  Revenue - Operating costs - depreciation - interest on bonds outstanding    .......................1

put here value we get

Earnings Before Tax   =   $15,500 - $8,250 - $1,750 - ( 7% of $9,000 )

Earnings Before Tax   = $7,250  - $1,750 - $630

Earnings Before Tax   =   $7,870