Question

Brown Office Supplies recently reported $18,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)? (Points : 10)
$5,981
$7,398
$7,870
$5,903
$6,217

Answer 1

b.7,870

EBT means Earnings Before Tax, so you ignore the tax rate for this problem. Then solve for the EBT figure.

Revenue less Operating costs equal

$18,500 - $8,250 = $10,250

Less Depreciation

$10,250 - $1,750 = $8,500

Less interest of ($9,000 X 7%) $630

$8,500 - $630 = $7,870

Answer 2

Total operating costs= 10,000$

Therfore, firms earnings= 18500-10000- 9000*0.07

= 8500- 630= $7870

Answer 3

$7870 ;

Interest= 7% of $9000 =$630;

So,earning= $ 18 500-(8250+1750)- Interest =$7870