Reyes Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-ho

Response: $11,200

Justification:

Utilizing the accounting equation:

(Total Assets) = (Total Liabilities) + (Total Capital)

Thus,

(Total Liabilities) = (Total Assets) - (Total Capital)    (1)

To determine total liabilities, we first need to ascertain total assets and total capital.

At the end of the first year, the assets of Shapiro's consulting services are as follows:

Cash:                              $16,000
Office Supplies:                $3,200
Equipment:                     $24,000
Accounts Receivable:       $8,000
TOTAL ASSETS            $51,200

Note that total assets are calculated by summing the values of each asset above.

Net income represents an increase (or decrease if it's a loss) in capital, thus we classify it as part of capital. Specifically, net income at the end of the first year adds to the initial capital.

The owner's withdrawal also decreases the capital. 

Consequently, total capital at the end of the first year is computed as:

Capital (beginning of the year):            $15,000
Net Income (end of year):           $27,000   
Withdrawal Amount:                    ($2,000)
TOTAL CAPITAL:                       $40,000

Note: The notation ($2,000) indicates a deduction of $2,000 in accounting terms.

Using (1), total liabilities at the end of the first year can be calculated as

(Total Liabilities) = (Total Assets) - (Total Capital)
                           = $51,200 - $40,000
Total Liabilities = $11,200

Doc's ribhouse commenced with $52,000 in equity, generated $35,000 in net income, and distributed $12,000 in dividends. To find the ending equity, use the formula: Beginning Equity + Net Income - Dividends = Ending Equity. Plugging in the values gives us: $52,000 + $35,000 - $12,000 = Ending equity. This results in $52,000 + $23,000 = $75,000, confirming the ending equity is $75,000.

Answer:

The interest amounts to $1,000,000.

Explanation:

The standard format of an income statement includes:

Revenue/Sales (+)

Cost of Goods Sold (COGS) (-)

=Gross Profit

Marketing, Advertising, and Promotion Expenses (-)

General and Administrative (G&A) Expenses (-)

=EBITDA

Depreciation & Amortization Expense (-)

=Operating Income or EBIT

Interest (-)

Other Expenses (-)

=EBT (Pre-Tax Income)

Income Taxes (-)

=Net Income

For this case:

EBIT equals $6,000,000.

The interest is to be determined.

Tax is calculated as 0.40.

EBITDA stands at $3,000,000.

The interest formula is: interest = [EBITDA / (1 - tax)] - EBIT

Substituting values, interest = 3000000 / 0.60 - 6000000 = -$1,000,000.

With EBIT at 6 million, the interest is $1 million, and the tax amounts to 2 million (calculated as (EBIT - interest) * 0.40).

Thus, the net income is $3 million.