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27 August, 00:56

During the year, Belyk Paving Co. had sales of $2,396,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,429,000, $435,400, and $490,400, respectively. In addition, the company had an interest expense of $215,400 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) a. What is the company's net income? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e. g., 32.) b. What is it's operating cash flow?

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  1. 27 August, 01:17
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    a) $-174,200 b) $531,600

    Explanation:

    This information can only be correctly disclosed through an income statement as shown below.

    Belyk Paving Co

    Income Statement

    For the period---

    $

    Sales 2,396,000

    Less: Cost of Goods Sold 1,429,000

    Gross Margin 967,000

    Less expenses:

    Depreciation (490,400)

    Selling and administrative expenses (435,400)

    EBIT 41,200

    Less: Interest Expenses (215,400)

    EBT (174,200)

    Less: 30% tax 0 - - (Note 1)

    Net loss (174,200)

    a) Net Loss $ 174,200

    b) Operating Cash Flow = EBIT - Taxes + Depreciation

    = 41,200 - 0 + 490,400

    = $531,600

    Note 1: No tax is paid when EBT is negative
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