Ques. 4) In 2010, Jack\'s Art Gallery sold 200 original works of art for $1,240,

Question

Ques. 4) In 2010, Jack's Art Gallery sold 200 original works of art for $1,240,520. The gallery acquired the works sold for $530,000. Each painting was framed using predesigned framing kits in the gallery's own workshop. The firm bought 100 kits in January for $50,000, 100 kits in March for $60,000.,100 kits in May for $40,000 and 100 kits in August for $30,000. Other costs of operation, including salaries, supplies, rent, etc., totaled $200,000. The company depreciated its assets by $120,000 and paid interest on loans totaling $55,000. Assuming no other costs and that Jack's Art Gallery used FIFO in its inventory management, the firm's EBITDA for 2010 was: a. $280,520 b. $230,520 c. $400,520 d. $440,520

Explanation / Answer

c. $400,520 Cost of good sold = opening stock + purchases - closing stock COGS = 0 + $180,000 - $70,000 = $110,000 Gross profit = Sales - COGS = $1,240,520 - $110,000 = $1,130,520 EBIT = Gross profit - expenses EBIT = $1,130,520 - $530,000 - $200,000 = $400,520

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