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13 January, 01:13

The following data were taken from the records of Township Corporation at December 31 of the current year: Sales revenue $ 90,000 Gross profit 37,000 Selling (distribution) expense 5,700 Administrative expense? Pretax income 13,800 Income tax rate 35% Shares of stock outstanding 2,800

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  1. 13 January, 01:19
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    Administrative expense = $17,500

    Explanation:

    Administrative expense is classified as operating expense. It will be deducted from the gross profit to calculate the Pretax Income.

    Sales revenue $90,000

    Gross profit $37,000

    Selling (distribution) expense ($5,700)

    * Administrative expense ($17,500)

    Pretax income $13,800

    Income tax rate 35% ($4,830)

    After Tax Income $8,970

    Shares of stock outstanding 2,800

    Pretax income is calculated as follow

    Pretax Income = Gross profit - Selling (distribution) expense - Administrative expense

    $13,800 = $37,000 - $5,700 - Administrative expense

    $13,800 = $31,300 - Administrative expense

    Administrative expense = $31,300 - $13,800

    Administrative expense = $17,500
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