Multiple Choice
Aaron bought 17 chicken wings for \$37.40. If Aaron spent \$28.60 on chicken wings, what is the net sales value of the remaining chicken wings?
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4. Merchandising Operations
Net Sales
Multiple Choice
ABC Corporation has the following information for the year:\(\begin{align*}\)\(\text{Net Sales}\) &= \$500,000 \\\(\text{Cost of Goods Sold}\) &= \$300,000 \\\(\text{Operating Expenses}\) &= \$100,000 \\\(\text{Depreciation Expense}\) &= \$20,000 \\\(\text{Interest Expense}\) &= \$10,000 \\\(\text{Income Tax Rate}\) &= 30\% \(\end{align*}\)What is the operating cash flow for ABC Corporation?
A
\$70,000
B
\$80,000
C
\$98,000
D
\$90,000
Verified step by step guidance1
Step 1: Start by calculating the Operating Income (EBIT). Operating Income is calculated as Net Sales minus Cost of Goods Sold (COGS) and Operating Expenses. Use the formula: \( \text{Operating Income} = \text{Net Sales} - \text{COGS} - \text{Operating Expenses} \).
Step 2: Add back the Depreciation Expense to the Operating Income. Depreciation is a non-cash expense, so it is added back to calculate the Operating Cash Flow. Use the formula: \( \text{Adjusted Operating Income} = \text{Operating Income} + \text{Depreciation Expense} \).
Step 3: Subtract the Interest Expense from the Adjusted Operating Income to calculate the Earnings Before Tax (EBT). Use the formula: \( \text{EBT} = \text{Adjusted Operating Income} - \text{Interest Expense} \).
Step 4: Calculate the Income Tax Expense by applying the Income Tax Rate to the Earnings Before Tax (EBT). Use the formula: \( \text{Income Tax Expense} = \text{EBT} \times \text{Income Tax Rate} \).
Step 5: Subtract the Income Tax Expense from the Earnings Before Tax (EBT) to calculate the Operating Cash Flow. Use the formula: \( \text{Operating Cash Flow} = \text{EBT} - \text{Income Tax Expense} \).
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