Calculate the net income after corporate income tax is paid for Quarter 1.
\begin{tabular}{|l|r|r|}
\hline \multicolumn{3}{|c|}{ Income Statement } \\
\hline & Q1 $(\times 1000)$ & Q2 $(\times 1000)$ \\
\hline Net Sales & 112 & 174 \\
\hline COGS & $(18)$ & $(32)$ \\
\hline Gross Profit & 94 & 142 \\
\hline Overhead & $(31)$ & $(53)$ \\
\hline Pre-tax Income & 63 & 89 \\
\hline
\end{tabular}
Corporate Income Tax = $13,230
Net Income = $[ ? ]
Answer (1)
Identify the pre-tax income and corporate income tax for Quarter 1.
Subtract the corporate income tax from the pre-tax income to find the net income: $63,000 - $13,230.
Calculate the net income: $49,770.
State the final net income after tax: 49770 .
Explanation
Understanding the Problem We are given the pre-tax income for Quarter 1 (Q1) as $63,000 and the corporate income tax as $13,230. We need to calculate the net income after the corporate income tax is paid.
Setting up the Calculation To find the net income, we subtract the corporate income tax from the pre-tax income. This can be expressed as:
Net Income = Pre-tax Income - Corporate Income Tax
Calculating Net Income Now, we substitute the given values into the equation:
Net Income = $63,000 - $13,230
Net Income = $49,770
Final Answer Therefore, the net income after corporate income tax is paid for Quarter 1 is $49,770.
Examples
Understanding net income after taxes is crucial for evaluating a company's profitability. For instance, if you're analyzing a small business's financial health, knowing its net income helps determine its ability to reinvest in growth or distribute profits to owners. Imagine a local bakery with a pre-tax income of $75,000 and a tax bill of $15,000; its net income of $60,000 reveals the actual profit available for business improvements or owner payouts. This understanding is fundamental in making informed financial decisions.
