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During 2014, Raines Umbrella Corp. had sales of $790,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $610,000, $85,000, and $190,000, respectively. In addition, the company had an interest expense of $52,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.)
a. What is Raines’s net income for 2014? (Do not round intermediate calculations. Input the amount as a positive value.) $
b. What is the company's operating cash flow? (Do not round intermediate calculations.) Operating cash flow $

Respuesta :

Answer:

(a) -$147,000

(b) $95,000

Explanation:

(a) EBIT:

= Sales - Cost of goods sold - Administrative and selling expenses - Depreciation expense

= $790,000 - $610,000 - $85,000 - $190,000

= -$95,000

EBT = EBIT - Interest expense

       = -$95,000 -  $52,000

       = -$147,000

Net Income = EBT - Tax expense

                    = -$147,000 - $0

                    = -$147,000

(b) company's operating cash flow:

= EBIT + Depreciation Expense

= -$95,000 + $190,000

= $95,000

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