Question

Emery Mining Inc. recently reported $147,500 of sales, $75,500 of operating costs other than depreciation, and $10,200 of depreciation. The company had $16,500 of outstanding bonds that carry a 7.25% interest rate, and its federal-+-state income tax rate was 25%. How much was the firm's net income? The firm uses the same depreciation expense for tax and stockholder reporting purposes. (Round your intermediate and final answers to two decimal places.) a. $35,847.12 b. $38,604.59 c. $36,634.97 d. $45,452.81 e. $47,664.85

Answer 1

Answer: D.) $45,452.81

Explanation:

Given the following :

Sales = $147,500

Operating expenses = $75,500

Depreciation = $10,200

Outstanding bonds = $16,500

Interest rate on bonds = 7.25% = 0.0725

federal-+-state income tax rate = 25% = 0.25

Net income =?

Net income can be calculated as follows:

Net income = (Sales - Operating Expenses - Depreciation - (Outstanding bond value × Interest rate)) × (1 - Tax rate)

Net income = ($147,500 - $75,500 - $10,200 - ($16,500 × 0.0725)) × (1 - 0.25)

Net income = ($147,500 - $75,500 - $10,200 - $1,196.25) × 0.75

Net income = $60,603.75 × 0.75

Net income = $45,452.81

Answer 2

The firm's net income is :  $45,452.81

What is Net income?

Net income represents the difference between revenues and expenses. The expenses include both operating and non-operating expenses. An income statement is prepared to determine the net income.

Net income

= (Sales revenue - Operating costs - Depreciation - Interest expense) * (1 - Tax rate)

= $147,500 - $75,500 - $10,200 - ($16,500 * 7.25%) * (1 - 0.25)

= $147,500 - $75,500 - $10,200 - $1,196.25) × 0.75

= $60,603.75 × 0.75

= $45,452.81

Therefore, the firm's net income is $45,452.81

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