Question

Lifeline, Inc., has sales of $836,128, costs of $398,325, depreciation expense of $134,520, interest expense of $39,412, and a tax rate of 35 percent. What is the net income for this firm? (Hint: Build the Income Statement)

Answer 1

To find the net income for Lifeline, Inc., we build an income statement by deducting costs, depreciation, and interest from sales, and then subtracting the taxes on the remaining amount. The net income for Lifeline, Inc. is $171,516.

Step-by-step explanation:

To calculate the net income for Lifeline, Inc., we need to build the income statement, which shows the company's revenues and subtracts costs to find the profit. The formula to calculate net income is:

Net Income = Sales - Costs - Depreciation - Interest Expense - Taxes

Using the given information, we can calculate each component:
First, calculate Earnings before Taxes (EBT):

EBT = Sales - Costs - Depreciation - Interest Expense = $836,128 - $398,325 - $134,520 - $39,412 = $263,871

Now, calculate Taxes:

Taxes = EBT * Tax Rate = $263,871 * 0.35 = $92,355

Finally, we find the net income:

Net Income = EBT - Taxes = $263,871 - $92,355 = $171,516

The net income for Lifeline, Inc. is $171,516.