Question

Lifeline, Inc., has sales of $603,000, costs of $255,000, depreciation expense of $62,000, interest expense of $29,000, and a tax rate of 30 percent. The firm paid out $45,000 in cash dividends. What is the net income for this firm?

Answer 1

Answer:

The net income of this firm is $179,900.

Explanation:

Net income of firm refers to sales of the firm minus cost of goods, operating expenses, selling and administrative expenses, depreciation, interest expense, taxes, and among others.

Net income is also referred to as net earnings and investors usually employ it as a metric to determine the amount by which a firm's revenue is greater than its expenses.

For this question, net income can be determined by preparing the firm's income statement as follows:

                     Lifeline, Inc.

              Income Statement

                   For the Year ...

Particular                                Amount ($)

Sales                                          603,000

Cost of sales                           (255,000)

Gross profit                               348,000

Depreciation expense              (62,000)

Interest expense                      (29,000)  

Income bore tax                       257,000

Tax (30% * 257,000)                 (77,100)  

Net income                               179,900

Dividends                                 (45,000)  

Retained earnings                     134,900  

From the income statement above, the net income of this firm is $179,900.