Question

10. Emily Lim owns and runs an ice cream parlor in San Diego. Last year, she had sales of $520,000 and an average tax rate of 28%. She spent $52,000 on ingredients, $26,000 on utilities, and $93,600 to rent the premises. Emily has a few employees and paid them $104,000 in wages in total. She also paid herself a salary of $78,000 and spent $52,000 to pay for employee benefits. A few years ago, Emily borrowed money to buy the ice making equipment. Last year, she paid $26,000 in interest on that loan. Depreciation for the equipment was $15,600. a. What was operating income (EBIT) for the year? b. What was net income for the year?

Answer 1

Sales Revenue	520,000
Less: Operating Expenses
Ingredients	52,000
Utilities	26,000
Rent	93,600
Wages Expense	104,000
Salary	78,000
Depreciation	15,600
Employee Benefit	52,000
Operating Income (EBIT)	98,800
Less; Interest	26,000
EBT	72,800
Less: Tax @28%	20,384
Net Income	52,416