Question

2. National Importers has sales of $609,600, costs of $548,150, depreciation expense of $35,100, and interest paid of $12,400. The tax rate is 28 percent. How much net income did the firm earn for the period?

3. The Comfy Inn had beginning retained earnings of $18,670. During the year, the company reported sales of $93,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 34 percent. What is the retained earnings balance at the end of the year?

Answer 1

2. Net income = (sales - costs - depreciation - interest)*(1-tax rate)

Sales	609,600.00
less: costs	548,150.00
EBITDA	61,450.00
less: depreciation	35,100.00
EBIT	26,350.00
less: interest	12,400.00
PBT	13,950.00
less: tax @ 28%	3,906.00
Net income	10,044.00

Thus net income = $10,044

3. We will first compute net income earned during the year.

Sales	93,490.00
less: costs	68,407.00
EBITDA	25,083.00
less: depreciation	8,200.00
EBIT	16,883.00
less: interest	478.00
PBT	16,405.00
less: tax @ 34%	5,577.70
Net income	10,827.30

Retained earnings balance at the end of the year = opening balance+net income - dividends

= 18670+10827.30-950

= $28,547.30

answered by: anonymous