A company had the following situation last year Gross sales- 6,890,000 Expenses-

Question

A company had the following situation last year
Gross sales- 6,890,000
Expenses- 3,500,000

They purchased a machine that cost 1,000,000 that they intend to depreciate over 5 years using straight line (year 1)what was their before tax income

A company had the following situation last year
Gross sales- 6,890,000
Expenses- 3,500,000

They purchased a machine that cost 1,000,000 that they intend to depreciate over 5 years using straight line (year 1)what was their before tax income

A company had the following situation last year Gross sales- 6,890,000 Expenses- 3,500,000 They purchased a machine that cost 1,000,000 that they intend to depreciate over 5 years using straight line (year 1)what was their before tax income

Explanation / Answer

Depreciation expense=Cost/useful life'

=(1,000,000/5)=$200,000

Hence before tax income=Sales-Expenses-Depreciation expense

=(6,890,000-3,500,000-200,000)

=$3,190,000.

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