Building an Income Statement Papa Roach Exterminators, Inc., has sales of $586,000, costs of $247,000, depreciation expense of $43,000, interest expense of $32,000, and a tax rate of 35 percent. What is the net income for this firm?
To calculate the net income for Papa Roach Exterminators, Inc., you need to subtract all the expenses from the sales and then deduct the tax expense.
1. Start by subtracting the cost of goods sold (or costs) from the sales:
Net Sales = Sales - Cost of Goods Sold
= $586,000 - $247,000
= $339,000
2. Next, subtract the operating expenses, which in this case include depreciation and interest expenses, from the net sales:
Operating Income = Net Sales - Depreciation Expense - Interest Expense
= $339,000 - $43,000 - $32,000
= $264,000
3. Finally, calculate the net income by subtracting the tax expense from the operating income:
Net Income = Operating Income - Tax Expense
= $264,000 - (Tax Rate * Operating Income)
= $264,000 - (0.35 * $264,000)
= $264,000 - $92,400
= $171,600
Therefore, the net income for Papa Roach Exterminators, Inc. is $171,600.