1.) INCOME STATEMENT Little Books Inc. recently reported $5.5 million of net inc

Question

1.) INCOME STATEMENT Little Books Inc. recently reported $5.5 million of net income. Its EBIT was $12 million, and its tax rate was 40%. What was its interest expense? [Hint: Write out the headings for an income statement and fill in the known values. Then divide $5.5 million of net income by (1 — T) = 0.60 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.] Round TWO decimal places.

2.) INCOME STATEMENT Pearson Brothers recently reported an EBITDA of $9 million and net income of $2.8 million. It had $1.5 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Round to TWO decimal places.

Explanation / Answer

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EBIT 12million Less:interest(balance)($12million-$9.17million) $2.83million(Approx). EBT(100%)($5.5million/0.6) $9.17million Less:tax@40%(9.7million*0.4) ($3.67million) Net income(60%) $5.5million

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