Question

During the year, the Senbet Discount Tire Company had gross sales of $1.19 million. The company’s cost of goods sold and selling expenses were $588,000 and $241,000, respectively. The company also had notes payable of $800,000. These notes carried an interest rate of 4 percent. Depreciation was $118,000. The tax rate was 23 percent.

a.
What was the company’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)

b.
What was the company’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)

Answer 1

Net income is $162,470

Operating cash flow is $280,470

Step-by-step explanation:

The company net income can be computed thus:

Sales revenue $1,190.000

less:

Cost of goods sold ($588,000)

gross profit $602,000

selling expenses ($241,000)

depreciation ($118,000)

EBIT $243,000

Interest($800,000*4%) ($32,000)

EBT $211,000

Tax at 23% ($48530 )

Net income $162,470

Besides the operating cash flow is net income plus depreciation

$162,470+$118,000=$280,470