# Fraser Corporation has announced that its net income for the year ended June 30, 2011, was...

Fraser Corporation has announced that its net income for the year ended June 30, 2011, was $1,353,412. The company had EBITDA of$4,618,479, and its depreciation and amortization expense was equal to $1,338,033. The company's tax rate is 34 percent. What was its interest expense? (Round answer to 2 decimal places.) ## Income Statement: The income statement is a part of the final accounts and calculates the net profit or loss earned by the entity. The income statement can be presented as single-step, the variable cost, absorption, multi-step format and shows expenses and revenues in different categories ## Answer and Explanation: The interest expense is calculated as under • The EBITDA is$4,618,479
• The depreciation and amortization expense was equal is $1,338,033 The earnings before interest and income tax will be calculated EBIT = EBITDA - depreciation and amortization =$4,618,479 - $1,338,033 =$3,280,443

• The earnings before interest and income tax is $3,280,443 • The net income is$1,353,412
• The income tax rate is 34% on earnings before tax

The earnings before income tax = net income / (1- tax rate)
= $1,353,412 / (1-0.34) =$ 1,353,412 / 0.66
=$2,050,624.24 • The earnings before income tax is$2,050,624.24

The interest expense is calculated below

Interest expense = earnings before interest and income tax - earnings before income tax
= $3,280,443 -$2,050,624.24
=$1,229,818.76 The interest expense is$1,229,818.76 