4. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows:
Cost of goods sold............................... $1.2 million
Administrative expenses........................ $250,000
Marketing and selling expenses............... $175,000
Depreciation........................................ $500,000
Interest expense.................................. $200,000
Dividends paid..................................... $150,000
(TCO 1) Assuming a tax rate of 30%, what is the EBIT and taxable income for the year?
(Points : 3)
$1,000,000 and $800,000 respectively
$575,000 and $375,000 respectively
$565,000 and $365,000 respectively
$425,000 and $225,000 respectively
None of the above
fOR THIS ONE I CHOOSE NONE OF THE ABOVE
$1,000,000 and $800,000 respectively
To calculate the EBIT (Earnings Before Interest and Taxes) and taxable income, we need to subtract the expenses from the sales revenue.
1. Start by subtracting the cost of goods sold, administrative expenses, marketing and selling expenses, depreciation, and interest expense from the sales revenue to calculate the EBIT:
EBIT = Sales Revenue - Cost of Goods Sold - Administrative Expenses - Marketing and Selling Expenses - Depreciation - Interest Expense
EBIT = $2,700,000 - $1,200,000 - $250,000 - $175,000 - $500,000 - $200,000
EBIT = $375,000
2. Once we have the EBIT, we can calculate the taxable income by subtracting the dividends paid:
Taxable Income = EBIT - Dividends Paid
Taxable Income = $375,000 - $150,000
Taxable Income = $225,000
Based on the calculations, the correct answer is:
$375,000 for EBIT and $225,000 for taxable income.
Therefore, the correct answer choice for this question is "None of the above."