Question

Using the following information, compute NET INCOME.

Cost of Goods Sold $ 6,000
Interest Expense 1,100
Selling and Administrative Expense 750
Cash 400
Sales 10,000
Accrued Wages Payable 250
Dividends 700
Retained Earnings (beginning) 1,000
Income Tax Expense 1,200

a. $1,350
b. $700
c. $1,700
d. $950
e. $1,950

Answer 1

d. $950

Step-by-step explanation:

Calculation to determine the NET INCOME

Sales $ 10,000.00

Cost of goods sold $ 6,000.00

Gross margin $ 4,000.00

($10,000-$6,000)

Selling and administrative expenses $ 750.00

Net operating income $ 3,250.00

($4,000-$750)

Interest expense $ 1,100.00

Net income before taxes $ 2,150.00

($3,250-$1,100)

Income taxes $ 1,200.00

Net income $ 950.00

($2,150-$1,200)

Therefore the NET INCOME will be $950