Question

(Computing income taxes?) The William B. Waugh Corporation is a regional Toyota dealer. The firm sells new and used trucks and is actively involved in the parts business. During the most recent? year, the company generated sales of $ 3.16 million. The combined cost of goods sold and the operating expenses were ?$2.18 million.? Also, $405,?000 in interest expense was paid during the year.

Calculate the? corporation's tax liability

Answer 1

Sales (s)	$      31,60,000.00
COGS & OPEX (CO)	$      21,80,000.00
EBIT (S - CO)	$        9,80,000.00
Interest (I)	$        4,05,000.00
EBT (EBIT - I)	$        5,75,000.00

EBT - Earning before tax which is the tax liability  of firm. COGS and OPEX include depriciation . Hence, we get EBIT (earning before interest and Tax) directly by deducting COGS and OPEX from Sales.