Question

During the year, Belyk Paving Co. had sales of $2,396,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,429,000, $435,400, and $490,400, respectively. In addition, the company had an interest expense of $215,400 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.)a. What is the company's net income? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)b. What is it's operating cash flow?

Answer 1

a) $-174,200 b) $531,600

Step-by-step explanation:

This information can only be correctly disclosed through an income statement as shown below.

Belyk Paving Co

Income Statement

For the period---

$

Sales 2,396,000

Less: Cost of Goods Sold 1,429,000

Gross Margin 967,000

Less expenses:

Depreciation (490,400)

Selling and administrative expenses (435,400)

EBIT 41,200

Less: Interest Expenses (215,400)

EBT (174,200)

Less: 30% tax 0 -- ( Note 1)

Net loss (174,200)

a) Net Loss $ 174,200

b) Operating Cash Flow= EBIT- Taxes + Depreciation

= 41,200 - 0 + 490,400

= $531,600

Note 1: No tax is paid when EBT is negative