Answer:
Option (c) $1,890
Explanation:
Data provided in the question:
Income tax rate = 40%
Sales = 10,000
Dividends = 700
Cost of Goods Sold = $4,000
Interest Expense = 1,100
Selling and Administrative Expense = 1,750
Now,
Total income before tax = Total revenue - Total expenses
= [ Sales ] - Cost of Goods Sold - [ Interest Expense + Selling and Administrative Expense ]
= [ $10,000 ] - $4,000 - [ $1,100 + $1,750]
= $10,000 - $4,000 - $2,850
= $3,150
Tax = 40% of Total income before tax
= 0.40 × $3,150
= $1,260
Thus,
NET INCOME = Total income before tax - Tax
= $3,150 - $1,260
= $1,890
Hence,
Option (c) $1,890
