# Brown Office Supplies recently reported $15,500 of sales,$8,250 of operating costs other than depreciation, and $1,750 of depreciation. Brown Office Supplies recently reported$15,500 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) ### Answers Earnings Before Tax =$7,870

Explanation:

given data

sales = $15,500 operating costs =$8,250

depreciation = $1,750 bonds outstanding =$9,000

interest rate = 7%

federal-plus-state income tax rate = 40%

solution

foe Earnings Before Tax that is here we ignore tax rate so

Earnings Before Tax   =  Revenue - Operating costs - depreciation - interest on bonds outstanding    1

put here value we get

Earnings Before Tax   =   $15,500 -$8,250 - $1,750 - ( 7% of$9,000 )

Earnings Before Tax   = $7,250 -$1,750 - $630 Earnings Before Tax =$7,870

$630 Explanation: The computation of the firm's interest expense is = Outstanding bonds × rate of interest =$9,000 × 7%

= $630 For computing the interest expense, we multiplied the outstanding bond with the interest rate so that the accurate amount could come This is the answer but the same is not provided in the given options The firm's earnings before taxes (EBT) was$4,870

Explanation:

Brown Office Supplies

Income statement for the year

\$

Sales                                                         15,500

Operating Cost                                        (8,250)

Depreciation expense                             (1,750)

Operating Earning                                    5,500

Interest expense ( 9000 x 7% )               (630)

Earning before Tax                                   4,870

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