Consider the following information for Ball CorpWhat is the Net Profit?

Question

BlackTom AI · Accepted Answer

We start by laying out the given figures and computing step by step.

First, determine gross profit. Sales are 350,000 and cost of goods sold is 110,000, so Gross Profit = Sales − COGS = 350,000 − 110,000 = 240,000.

Next, subtract operating expenses to get operating income. Selling and administrative expense is 40,000 and depreciation expense is 70,000. Total operating expenses = 40,000 + 70,000 = 110,000. Therefore Operating Income = Gross Profit − Operating Expenses = 240,000 − 110,000 = 130,000.

Now account for interest expense to get income before tax. Interest expense is 30,000, so Income Before Tax = Operating Income − Interest Expense = 130,000 − 30,000 = 100,000.

Finally, apply taxes to obtain net profit. Taxes are 17,500, so Net Profit = Income Before Tax − Taxes = 100,000 − 17,500 = 82,500.

Now evaluate each answer choice:

A. 130,000 — This value represents the operating income, not the net profit after interest and taxes. It ignores the deduction for interest expense and taxes, so it is incorrect as net profit.

B. 71,450 — This number does not align with any logical combination of the given line items. It would require an inconsistent treatment of expenses or taxes, so it is incorrect.

C. 82'500 — This matches the calculated net profit after subtracting both interest and taxes from the pre-tax income. It is the result of the proper sequence: gross profit, minus operating expenses, minus interest, minus taxes.

D. None of these — Since one of the provided options matches the computed net profit, this choice is incorrect.

In summary, by sequentially applying the items on the income statement (Sales, COGS, operating expenses, interest, taxes), the final net profit is 82,500, which is the value obtained after all deductions.

Consider the following information for Ball CorpWhat is the Net Profit?

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