Homework Answers
Answer:
a. Earnings before interest and tax = $1500
b. Net Income = $650
c. cash flow from operation = $1650
Explanation:
a.
Computation of Earnings before interest and tax:
|
Particulars |
Amount |
|
Sales |
$10000 |
|
Less: Cost of goods sold |
$6500 |
|
Gross profit |
$3500 |
|
Less: Depreciation Expense |
$1000 |
|
Less: General & Administrative Expense |
$1000 |
|
Earnings before interest and tax |
$1500 |
b.
Computation of Net Income:
|
Earnings before interest and tax |
$1500 |
|
Less: Interest Expense |
$500 |
|
Earnings before tax |
$1000 |
|
Less: Tax @35% |
$350 |
|
Net Income |
$650 |
C.
Computation of cash flow from operation:
|
Net Income |
$650 |
|
Adjust to reconcile Non cash Item: |
|
|
Depreciation Expense |
$1000 |
|
Cash flow from operation |
$1650 |
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