Answer:
$63,875
Explanation:
Temporary current assets =Current assets – permanent current assets
=$800,000 – $350,000 = $450,000
<em>Short-term interest expense will be computed as:-</em>
= 5% [$450,000 + ½ ($350,000)]
= $31,250
<em>Long-term interest expense will be computed as:-</em>
= 10% [$600,000 + ½ ($350,000)]
= $77,500
<em>Total interest expense is the sum of the two interest expenses:-</em>
= $31,250 + $77,500
= $108,750
Lear Inc Earnings before interest and taxes = $200,000
Interest expense = - $ 108,750
Earnings before taxes = $91,250
Taxes @ 30% rate ($91,250 X30%) = - $27,375
Earnings after taxes = $63,875