Question

Use the following information to compute NET INCOME.

The income tax rate is 40%.
Sales 10,000
Dividends 700
Cost of Goods Sold $ 4,000
Interest Expense 1,100
Selling and Administrative Expense 1,750.
a. 1,260b. 1,190c. 1,890d. 1,470e. 980

Answer 1

c. $1,890

Step-by-step explanation:

As for the provided information, we have

Net income is the income after allowing expenses of every nature, and after taxes, but does not include the dividend as is not an expense but allocation or distribution of profits.

Thus net income shall be as follows:

Sales - Expenses

Sales = $10,000

Expenses = $4,000 + $1,100 + $1,750 = $6,850

Profit before taxes = $3,150

Less: Taxes @ 40% = $1,260

Net Income = $1,890

Correct option is

c. $1,890