Question

The carpentry shop has sales of $398,600, costs of $254,800, depreciation expense of $26,400, interest expense of $1,600, and a tax rate of 34 percent. What is the net income for this firm?

A. $61,930
B. $66.211
C. $67,516

Answer 1

To determine the net income, we calculated earnings before taxes by subtracting total expenses (costs, depreciation and interest) from sales, then applied the tax rate, and finally subtracted taxes from earnings before taxes.

Step-by-step explanation:

To calculate the net income for the firm, we begin by subtracting its expenses from its sales. The expenses include costs of goods sold, depreciation expense, and interest expense.

After calculating the earnings before taxes, we then apply the tax rate to find the net income. Here are the steps in detail:

1. Subtract the costs ($254,800), depreciation expense ($26,400), and interest expense ($1,600) from the sales ($398,600) to find the earnings before taxes.
2. Calculate the taxes by multiplying the earnings before taxes by the tax rate (34 percent).
3. Subtract the taxes from the earnings before taxes to determine the net income.

Let's calculate it:

• Earnings before taxes = Sales - (Costs + Depreciation expense + Interest expense) = $398,600 - ($254,800 + $26,400 + $1,600) = $115,800
• Taxes = Earnings before taxes × Tax rate = $115,800 × 0.34 = $39,372
• Net Income = Earnings before taxes - Taxes = $115,800 - $39,372 = $76,428

None of the listed answer choices (A. $61,930 B. $66,211 C. $67,516) match the correct net income calculation of $76,428. There might be an error in the available options.