Question

The Ivanhoe Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.70 million, cost of goods sold of $813,400, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has an average tax rate of 35 percent. What is the company’s net income? Set up an income statement to answer the question. (Round answers to 2 decimal places, e.g. 15.25)

Answer 1

The net income for Ivanhoe Company for the period ending March 31, 2017, is calculated using its sales, COGS, depreciation, interest expenses, and tax rate to be $404,316.25.

Step-by-step explanation:

To calculate the net income for Ivanhoe Company, we need to build an income statement using the provided figures. Here's how this can be broken down:

• Sales: $1,700,000
• Cost of Goods Sold (COGS): $813,400
• Gross Profit: Sales - COGS = $1,700,000 - $813,400 = $886,600
• Depreciation Expense: $175,000
• Interest Expense: $89,575
• Operating Income: Gross Profit - Depreciation Expense = $886,600 - $175,000 = $711,600
• Pre-Tax Income: Operating Income - Interest Expense = $711,600 - $89,575 = $622,025
• Tax (35%): Pre-Tax Income * 35% = $622,025 * 0.35 = $217,708.75
• Net Income: Pre-Tax Income - Tax = $622,025 - $217,708.75 = $404,316.25

Therefore, the net income for Ivanhoe Company for the period ending March 31, 2017, is $404,316.25.

Answer 2

The company’s net income is $404,316.

Step-by-step explanation:

Ivanhoe Company

Income statement for the period ended March 31, 2017

$

Sales 1,700,000

Cost of goods sold (813,400)

Gross Income 886,600

Depreciation expense (175,000)

Operating Income 711,600

Interest expense (89,575)

Income before Tax 622,025

Tax rate 35% (217,709)

Net Income 404,316