How to Calculate Net Income?

Question

Using the Info provided calculate the net income for 2002.  Assume a tax rate of 40 percent.

Inventory: $5,000
Revenues: $200,000
Depreciation Expense: $5,000
Cost of Goods Sold: $100,000
Interest Expense: 10,000
Operating Expenses: 30,00


Thank You!

Robert · Accepted Answer

Name of the Company
Income Statement for the Year Ended 2002


Revenue	$200,000
Cost of Goods Sold 	100,000
Gross Profit 	100,000
Operating Expense	30,000
Depreciation      5,000
Net Income From Operation	65,000
Interest Expense  10,000
Net Income Before Income Tax	55,000
Income Tax	22,000
Net Income After Tax   $33,000

Amy · Answer

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Your gross sales figure is wrong. Where did you get $18,400? You have Cost of goods sold and you know it is 8% of gross sales, so you can easily calculate gross sales. Gross sales x .08 = $500,000. The same approach allows you to find administrative expenses. A good approach is to prepare an income statement leaving out the missing numbers. Then use the relationships provided to find some of the missing numbers, which allows you to find other amounts.

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How to Calculate Net Income?

2 Answers