Question

The Brick Company has announced the following financial information for the period ending March 31, 2017: sales of $1.4 million, cost of goods sold of $800,000, depreciation expenses of $175,000, and interest expenses of $90,000. Assume that the firm has an average tax rate of 40 percent. What is the company’s net income?

Answer 1

Answer: Net income = $201,000

Explanation:

Net income = (Sales - COGS - depreciation - interest expense)(1 - tax)

where;

Sales = $1,400,000

COGS(Cost of goods sold) = $ 800,000

Depreciation = $175,000

Interest expense = $90,000

Tax = 40%

∴ Net income = (1,400,000 - 800,000 - 175,000 - 90,000) $\times$(1 - 0.4)

Net income = 335,000 $\times$ 0.6

Net income = $201,000