Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation.

Question

Brown Office Supplies has recently reported sales of $15,500, with operating costs (excluding depreciation) amounting to $8,250 and depreciation expenses of $1,750. The company also has $9,000 in bonds outstanding that carry a 7.0% interest rate, and its combined federal and state income tax rate is 40%. Given this information, how much are the firm's earnings before taxes (EBT)?

Max Satterfield V · Accepted Answer

Earnings Before Tax   =   $7,870 Explanation:given data sales = $15,500 operating costs = $8,250depreciation = $1,750bonds outstanding = $9,000interest rate = 7% federal-plus-state income tax rate = 40% solutionfoe Earnings Before Tax that is here we ignore tax rate so  Earnings Before Tax   =  Revenue - Operating costs - depreciation - interest on bonds outstanding    1put 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

Anonymous · Answer

$630Explanation:The computation of the firm's interest expense is = Outstanding bonds × rate of interest= $9,000 × 7%= $630For computing the interest expense, we multiplied the outstanding bond with the interest rate so that the accurate amount could comeThis is the answer but the same is not provided in the given options

Anonymous · Answer

The firm's earnings before taxes (EBT) was $4,870Explanation:                               Brown Office Supplies                      Income statement for the year                                                                      $Sales                                                         15,500Operating Cost                                        (8,250)      Depreciation expense                             (1,750)Operating Earning                                    5,500      Interest expense ( 9000 x 7% )               (630)                                             Earning before Tax                                   4,870

Anonymous

Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation.

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