Question

During the year, the Senbet Discount Tire Company had gross sales of $1.23 million. The company's cost of goods sold and selling expenses were $592,000 and $245,000, respectively. The company also had notes payable of $840,000. These notes carried an interest rate of 4 percent. Depreciation was $122,000. The tax rate was 22 percent. a. What was the company's net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) b. What was the company's operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) Net income b. Operating cash flow

Answer 1

a. Net Income = $185,172

b. Operating Cash Flow =

Explanation

a.

Income Statement
		$
Sales		1,230,000.00
Less: Cost of Goods Sold		592,000.00
Gross profit		638,000.00
Less:
Selling expenses	245,000.00
Depreciation	122,000.00	367,000.00
Earning Before Interest & Tax		271,000.00
Less: Interest		33,600.00
Earning Before Tax		237,400.00
Less: Income Tax (22%)		52,228.00
Net Income		185,172.00

b. Operating Cash Flow =  Earning Before Interest & Tax + Depreciation - Taxes

= 271,000 + 122,000 - 52,228

= $340,772