Question

During 2018, Raines Umbrella Corp. had sales of $715,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $446,000, $95,000, and $140,500, respectively. In addition, the company had an interest expense of $70,600 and a tax rate of 21 percent. (Ignore any tax loss carryforward provisions and assume interest expense is fully tax deductible).

a. What is the company’s net income/loss for 2018?
b. What is the company's operating cash flow?

Answer 1

Answer:Net Income/ loss= -$37,100

Raine's operating cash flow= $174,000

Step-by-step explanation:

Net income/loss for Raines Umbrella Corp In 2018

Sales $715,000

less: Cost of goods sold -$446,000

Administrative and Selling expenses -$95,000

Depreciation -$140,500

EBIT $33,500

less: Interest $ 70,600

Net loss -$37,100

B) Raine's operating cash flow:

= EBIT + Depreciation - Taxes( Since a net loss was recorded by Raines, yhere would be no taxes

= $33,500 + $140,500 - $0

= $174,000