Answer to Question #294370 in Management for Jenelle

Question

Staycate Travels Inc. reports a gross profit of $35,000, interest expense of $4,000, a tax rate of 30% and earning after taxes of $8,610. What is Staycate’s depreciation expense?

Answer 1

Earnings after tax= Earnings before tax x ( 1 – Tax rate )

$8,610 = Earnings before tax x ( 1 – 30%)

Earnings before tax = $8,610 / ( 1 – 0.30 )

= $8,610 / 0.70

= $12,300

Gross Profit - Administrative and Selling expenses – Depreciation – Interest = Earnings before tax

$12,300 = $35,000 - $0 – Depreciation - $4,000

So, Depreciation = $35,000 - $0 - $4,000 - $12,300

= $18,700