During 2014. Raines Umbrella Corp. had sales of $910,000. Cost of goods sold, ad

Question

During 2014. Raines Umbrella Corp. had sales of $910,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $648,000, $125,000, and $170,000, respectively. In addition, the company had an interest expense of $59,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) What is Raines's net income for 2014? (Do not round intermediate calculations. Input the amount as a positive value.) What is the company's operating cash flow? (Do not round intermediate calculations.) Operating cash flow

Explanation / Answer

a. Profit before tax = Sales - Cost of goods sold - Administrative and selling expense - Depreciation expense - Interest expense

= $910,000 - $648,000 - $125,000 - $170,000 - $59,000

= - $92,000

Since loss is incurred, so no tax expense for the same.

Therefore, Net income = - $92,000

b. Operating cashflow = Net income + Depreciation expense

= - $92,000 + $170,000

= $78,000

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