Question

Thinkerbell Corp. reports the following information related to its most recent year(2020). The company has sales of $100 millions and the cost of goods sold and other expenses totaled $65 millions. Corporate income tax rate is 25% and legal reserves should be calculated as 5%. What's the net income of the year for Thinkerbell? *

Answer 1

•The net income of the year for Thinkerbell is = $26,250,000

•The net income of the year for Thinkerbell after reserve = $24,937,500.

• CALCULATION-

•Total revenue = 100 million that is,

= 100,000,000

•COGS = 65,000,000

• Net income = Total revenue - COGS

=1,00,000,000 - 65,000,000

=$ 35,000,000.

• Rate of corporate tax is = 25%

then,

= 35,000,000* 25% =$ 87,50,000

{Subtract the total amount of taxes paid during the year from the net income before tax to obtain net income after taxes.}

Net income = income - tax

= 35,000,000 - 87,50,000

= $ 26,250,000.

• 5% reserve , net income after taxes is= $26,250,000.

$26,250,000*5% = 13,12,500

= 35,000,000 - 13,12,500

= $24,937,500.

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