Question

A firm’s income statement included the following data. The firm’s average tax rate was 20%. Cost of goods sold $ 9,000 Income taxes paid 3,000 Administrative expenses 4,000 Interest expense 2,000 Depreciation 2,000
a. What was the firm’s net income? Net income $
b. What must have been the firm’s revenues? Revenues $
c. What was EBIT? EBIT $

Answer 1

Answer:

a. $12,000

b. $32,000

c. $17,000

Explanation:

The computations are shown below:

a.  Net income = (Income tax paid ÷ Tax rate) – Income tax paid    

Net income = ($3,000 ÷  20%) - $3,000    

                   = $12,000

b.  Revenues = Cost of goods sold + Income tax paid + Administration expense + Interest paid + Depreciation + Net income

= $9,000 + $3,000 + $4,000 + $2,000 + $2,000 + $12,000

= $32,000

3. EBIT = Net income + Interest expense + Taxes

= $12,000 + $2,000 + $3,000

= $17,000