Reading Corporation reports 2018 sales of $415 million, income before income taxes of $122.3...

Question:

Reading Corporation reports 2018 sales of $415 million, income before income taxes of $122.3 million and tax expense of $35.9 million.

If sales are projected to increase by 4% next year, projected tax expense for 2019 will be?

Income Before Interest and Taxes:

In preparing for the traditional income statement, cost of goods sold or the cost of services rendered are deducted from the total revenues or sales to compute for the gross margin. This gross margin amount is further deducted by the selling and administrative expenses, whether variable or fixed, to compute for the earnings before interest and taxes. Interest and taxes are separately presented as expenses, aside from the selling and administrative costs.

Answer and Explanation:

Reading Corporation reports 2018 sales of $415 million, income before income taxes of $122.3 million and tax expense of $35.9 million.

If sales are projected to increase by 4% next year, projected tax expense for 2019 will be?

Tax Expense 35.9 million
Divided by: Income before Interest and Taxes 122.3 million
Tax Rate 29.35%


Income before Interest and taxes 122.3 million
Sales 415 million
Net Profit Margin 29.47%


Applying the projection of 4%,

Sales 415 million
Increase in sales 1.04%
Projected Sales 431.6 million
Net profit Margin 29.47%
Income before interest and taxes 127.19 million
Tax Rate 29.35%
Projected Tax expense 37.33 million

Learn more about this topic:

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
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