Question

Hoobstank, inc., has sales of $425,000, cost of $210,000, depreciation expense of $63,000, interest expense of $38,000, and a tax rate of 35 percent. what is the net income for this firm

Answer 1

Hoobstank, inc.

Income Statement:
Sales......................................$425,000
Costs......................................$-210,000
Depreciation...........................$-63,000
EBIT(Operating Profit)............$152,000

To find EBIT: sales - costs -depreciation = EBIT
Ex. 425,000 - 210,000 - 63,000 = $152,000

Interest....................................$-38,000
EBT (Expense before tax).......$114,000

To find EBT: EBIT - Interest = EBT
Ex. 152,000 - 38,000 = $114,000

Tax rate 35%...........................39,900
To find Tax: Sales - cost - depreciation - Interest = Tax .35(answer) = tax
Ex. 425,000 - 210,000 - 63,000 - 38,000 = $114,000 (if your answer is equal to EBT, its correct) so, 0.35(114,000) = 39,900

Net Income..............................$74,100
To find Net Income: 114,000 - 39,900 = $74,100