Question

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, O salvage value) $585,000 Calculate Flip's taxable liability for the current year. Taxable Liability = 2 3 NOS

Answer 1

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Solution: Answer is highlighted in Yellow: Depreciation can be or not included in Other operating expense. Since, nothing is mentioned about depreciation, hence, both calculations have been shown: Sales 2720000 2720000 Less: cost of goods sold 350000 350000 Gross Profit 2370000 2370000 Less: Other expenses: Advertising expense 40000 40000 Other operating expense 330000 330000 Depreciation on equipment (585000/10) 58500 428500 370000 Taxable Income 1941500 2000000 Tax rate - 21% 21% 21% Taxable Liability 407715 420000