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5 August, 19:25

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)

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  1. 5 August, 21:07
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    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
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