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Brown Office Supplies recently reported $16,000 of sales, $8,250 of operating costs other than depreciation, and...

Brown Office Supplies recently reported $16,000 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)?

a. $6,551
b. $5,370
c. $6,122
d. $4,994
e. $6,444
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Answer #1
Income Statement  
Sales              16,000
Less: Operating Costs                8,250
Less: Depreciation Expenses                1,750
Earnings before Interest & Tax (EBIT)                6,000
Less: Interest Expenses [$9,000 x 7.00%]                  630
Earnings Before Tax (EBT)                5,370

The firm's earnings before taxes (EBT) is $5,370

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