A firm had sales of 900000 in 2008 The cost of goods sold wa

A firm had sales of $900,000 in 2008. The cost of goods sold was $550,000, general and administrative expenses were $80,000, interest expenses were $30,000, and depreciation was $80,000. Please, calculate following: 3. a. Earning before interest and taxes b. Marginal and average tax rates for the firm (use table below) c. Net income d. Cash flow from operation Taxable Income (S) 0-50,000 50,001-75,000 75,001-100,000 100,001-18,333,333 over 18,333,333 15 25 34 34-39 35

Solution

Sales $900,000.00 Less: COGS $550,000.00 Gross Profit $350,000.00 Less: General & Administrative $80,000.00 Less: Depreciation $30,000.00 Earning Before Interest and Tax $240,000.00 a) Less: Interest $80,000.00 Earning Before Tax $160,000.00 Less: Tax $45,650.00 Marginal Tax Rate Net Income $114,350.00 c) $50,000 x 15% $7,500.00 ($75,000 - $50,000) x 25% $6,250.00 b) Marginal Tax Rate = 39.00% ($100000 - $75000) x 34% $8,500.00 Average Tax Rate = $45,650/$160000 28.53% ($160,000 - $100,000) x 39% $23,400.00 $45,650.00 d) Cash Flow from Operation Cash Flow from Operation = Net income + Noncash Expenses(depreciation) $144,350.00