Elgin Battery Manufacturers had sales of $1,000,000 in 2009 and their cost of goods sold represented 70 percent of sales. Selling and administrative expenses were 10 percent of sales. Depreciation expense was $100,000 and interest expense for the year was $10,000. The firm's tax rate is 30 percent. What is the dollar amount of taxes paid?

Question

BlackTom AI · Accepted Answer

To tackle this problem, I’ll lay out the calculations step by step and evaluate each answer choice.
Option A: 'A. $27,000' would correspond to taxes of $27,000. To verify, compute taxable income: Sales = 1,000,000. Cost of goods sold = 70% of sales = 700,000, leaving gross profit of 300,000. Selling and administrative expenses = 10% of sales = 100,000, reducing operating income to 200,000. Depreciation expense = 100,000, bringing earnings before interest and taxes (EBIT) down to 100,000. Interest expense = 10,000 reduces EBT (earnings before tax) to 90,000. With a tax rate of 30%, taxes = 30% of 90,000 = 27,000. Therefore, this option matches the correct tax amount.
Option B: 'B. $30,000' would require taxes equal to 30,000. That would imply an EBT of 100,000 since 30% of 100,000 is 30,000. However, the calculated EBT from the given data is 90,000, not 100,000, so 30,000 taxes would be inconsistent with the provided figures.
Option C: 'None of these' claims that none of the listed amounts are correct. Given the precise calculation above showing taxes of 27,000, this option is incorrect because at least one of the options (A) matches the computed tax amount.
Option D: 'D. $117,800' represents a tax value far larger than the computed 27,000. Such a number would require a substantially higher EBT (roughly 392,667 if taxed at 30%), which is not supported by the revenue, cost, expense, and tax-rate data provided. Therefore, this choice is inaccurate.
In summary, the correct tax amount is derived by following the sequence: determine gross profit, subtract S&A and depreciation to obtain EBIT, subtract interest to get EBT, and finally apply the 30% tax rate. The only choice aligning with this sequence and the given numbers is $27,000, while the other options conflict with the calculated EBT or present an implausible tax amount given the data.

25_2 FIN401 Financial Management

查看解析

登录即可查看完整答案

类似问题

Sam, married filing separately with a qualifying child and NOT an abandoned spouse, has $335,000 salary, $25,000 qualified dividends, and $20,000 itemized deductions. Compute Sam's total tax liability for the current year including both her income tax and net investment income tax, if applicable.

Mr. and Mrs. Klein's joint tax return reports $260,000 AGI and $230,000 taxable income, which includes $15,000 qualified dividends. Compute the couple's total tax due in the current year rounded to the nearest dollar including their income tax and net investment income tax.

Jack, who is unmarried and maintains a home for two dependents, has $359,900 taxable income in the current year. Compute his tax liability before tax credits.

Sam, not married with one dependent child, has $225,000 salary and $75,000 qualified dividends. Her taxable income is $280,000. Compute Sam's total tax liability for the current year including both her income tax and net investment income tax, if applicable.

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单