Question

Griffin's Goat Farm, Inc., has sales of $665,000, costs of $327,000, depreciation expense of $71,000, interest expense of $45,500, and a tax rate of 23 percent.

What is the net income for this firm? (Do not round intermediate calculations.)

Answer 1

The information given in the question of sales, costs, depreciation and interest expenses form part of income statement. Hence, we can arrive at the net income of the firm by drawing an income statement which is shown in the image below:

Explanation: By deducting expenses from the sales we arrive at the sales net of expenses or net sales. From the net sales we shall deduct depreciation and interest expenses. This gives us the net income of the firm before tax. By deducting tax @ 23% as given in the question we arrive at the net income after taxes.

Hope this clarifies what is asked in the question.