Question

please post correct answer

Flip's Pizzeria Inc. has the following financial items for the current year: Advertising Expenses $40,000 Cost of Goods Sold $350,000 Other Operating Expenses $330,000 Sales $2,720,000 Cost of Equipment purchased during the year (10 year estimate useful life, 0 salvage value) $585,000 Calculate Flip's taxable liability for the current year A В C D E 1 Taxable Liability 2 3 4 5 6 7 8 10

Answer 1

Calculation of Gross Profit Gross Profit = Sales - Cost of Goods Sold = 2,720,000 - 350,000 = $ 23,70,000 Calculation of Operating Income Operating Income = Gross profit – Advertisement expense - Other operating Expenses – Depreciation = $2,370.000 – 40,000 – 330,000 - 58,500 = $ 19,41,500 Taxable Income = Operating Income Taxable Liability = Taxable Income X Tax Rate = $194,41,500 X 21% = $ 4,07,715.00 Depreciation = Cost of purchase No. of useful life 5,85,000 10 58,500