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23 January, 18:07

A company reports the following amounts at the end of the current year: Sales revenue $ 860,000 Selling expense 250,000 Gain on sale of investments 30,000 Interest expense 10,000 Cost of goods sold 520,000 Under normal circumstances (ignoring tax effects), permanent earnings would be computed as: Multiple Choice

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  1. 23 January, 18:36
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    The answer is $80,000

    Explanation:

    Permanent earnings are permanent. They are constant. They do not change in the nearest future.

    Variables to consider in this question are:

    Sales revenue - $860,000

    Selling expense - $250,000

    Interest expense - $10,000

    Cost of goods sold - $520,000

    Gross profit is Sales - cost of sales (cost of good sold) =

    $860,000 - $520,000

    =$340,000

    Permanent Earnings = Gross profit - Selling expense - interest Expense

    $340,000 - $250,000 - $10,000

    =$80,000
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