Question

The following amounts relate to XYZ Inc. for 2022:

Income tax expense 20% of pre-tax income.Net Income $40,000.Total operating expenses $ 40,000. Cost of sales 40% of revenue. XYZ Inc. had no non-operating revenues, non-operating expenses, gains, losses or discontinued operations. Based on the above how much was XYZ Inc’s total revenue?
A. $ 90,000
B. $133,333
C. $150,000
D. $225,0000

Answer 1

To calculate XYZ Inc.'s total revenue for 2022, we need to find the pre-tax income and then use the cost of sales. The pre-tax income can be determined by dividing the net income by 80%, and the total revenue can be found by dividing the cost of sales by 40%.

Step-by-step explanation:

To determine the total revenue of XYZ Inc., we will need to calculate the pre-tax income. Given that the income tax expense is 20% of the pre-tax income, we can calculate the pre-tax income by dividing the net income by 80% (100% - 20%).

Net Income = Pre-tax Income - Income Tax Expense
$40,000 = Pre-tax Income - 20% of Pre-tax Income
$40,000 = Pre-tax Income - 0.2 * Pre-tax Income
$40,000 = 0.8 * Pre-tax Income
Pre-tax Income = $40,000 / 0.8 = $50,000

Now, to find the total revenue, we can use the cost of sales, which is 40% of the revenue. Let's denote the total revenue as 'R':

Cost of Sales = 40% of Revenue
$40,000 = 0.4 * R
R = $40,000 / 0.4 = $100,000

Therefore, XYZ Inc.'s total revenue for 2022 is $100,000.