Alpaca Corporation had revenues of $280,000 in its first year of operations. The

Question

Alpaca Corporation had revenues of $280,000 in its first year of operations. The company has not collected on $19,400 of its sales and still owes $25,100 on $80,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $14,000 in salaries. Owners invested $24,000 in the business and $24,000 was borrowed on a five-year note. The company paid $3,100 in interest that was the amount owed for the year, and paid $5,300 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. Compute net income for the first year for Alpaca Corporation.

Explanation / Answer

Revenues $280,000 Expenses: Cost of goods sold $80,000 Salaries $14,000 Interest $3,100 Insurance $2,650 $99,750 Income before tax $180,250 Income tax at 40% $72,100 Net income $108,150

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