Question

During the year, the Senbet Discount Tire Company had gross sales of $1.11 million. The company's cost of goods sold and selling expenses were $530,000 and $220,000, respectively. The company also had debt of $850,000, which carried an interest rate of 5 percent. Depreciation was $135,000. The tax rate was 40 percent.

a. What was the company's net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

Net income             $  

b. What was the company’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

Operating cash flow              $

Answer 1

Answer of Part a: Sales Cost of Goods Sold Gross Profit Selling Expenses Depreciation EBIT Interest Expense EBT Income Tax@40% Net Income 1110000 530000 580000 220000 135000 225000 42500 182500 73000 109500

Answer of Part b:

Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flow = $225,000 + $135,000 - $73,000
Operating cash Flow = $287,000