difference between ebit and taxable income problem 1 little books inc recently repor 3268066

Difference between ebit and taxable income

Problem 1: Little Books Inc. recently reported $3 million of net income. Its EBIT was $6 million, and its tax rate was 40%. What was its interest expense? (Hint: Write out the headings for an income statement and fill in the known values. Then divide $3 million of net income by (1-T)=0.6 to find the pretax income. The difference between EBIT and taxable income must be the interest expense.

Problem 2: State of Stockholders’ Equity – Computer World Inc. paid out $22.5 million in total common dividends and reported $278.9 million of retained earnings at year-end. The prior year’s retained earnings were $212.3 million. What was the net income? Assume that all dividends declared were actually paid.

Difference between ebit and taxable income
Accounting Basics


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