How to get following answers right using equations and calculator (no excel) 2.
ID: 2766052 • Letter: H
Question
How to get following answers right using equations and calculator (no excel)
2.
Quigley, Inc. purchased a machine 4 years ago for $1,200,000. The machine is being depreciated on a straight-line basis to a salvage value of $200,000 over its estimated useful life of 20 years. What is the annual depreciation expense on this machine?
$80,000
$60,000
$50,000
$40,000
$0
4. The XYZ Company has sales of $500,000, a gross profit margin of 40%, operating expenses (excluding depreciation) of $70,000, depreciation expense of $30,000, interest expense of $40,000, taxes of $10,000 and dividends paid of $5,000. What is XYZ's earnings before interest and taxes (EBIT)?
$200,000
$130,000
$100,000
$60,000
None of the answers listed above are within $1000 of the correct answer
$80,000
$60,000
$50,000
$40,000
$0
4. The XYZ Company has sales of $500,000, a gross profit margin of 40%, operating expenses (excluding depreciation) of $70,000, depreciation expense of $30,000, interest expense of $40,000, taxes of $10,000 and dividends paid of $5,000. What is XYZ's earnings before interest and taxes (EBIT)?
$200,000
$130,000
$100,000
$60,000
None of the answers listed above are within $1000 of the correct answer
Explanation / Answer
2.
Annual depriciation expense under Straight line method
Deprication = Cost - Salvage value / Useful life
Depriciation = ($1,200,000 - $200,000) / 20 = $50,000
4.
XYZ's Earnings before interest and taxes
EBIT = Gross margine - Operating exp -Depriciation
Gross margine = 500,000*40% = $200,000
EBIT = $200,000 - $70,000 - $30,000 = $100,000
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