Homework Answers
Sales = $3,500,000
Revised cost of goods sold = 2,000,000 + 2%*2,000,000 = $2,040,000
Revised SG&A = 550,000 + 2%*550,000 = $561,000
Depreciation =$350,000
Interest expense = $50,000
Net income before tax
= 3,500,000 - 2,040,000 - 561,000 - 350,000 - 50,000
= $499,000
Tax = 499,000*25% = $124,750
Net income after tax
= 499,000 - 124,750
= $374,250
Therefore the correct option is 2nd.
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Looking ahead to the following year, the company’s CFO has
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