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help me check the mistakes Carr Auto Wholesalers had sales of $880,000 in 20XX, and cost of goods sold represented 77 percent of sales. Selling
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Carr Auto Wholesalers had sales of $880,000 in 20XX, and cost of goods sold represented 77 percent of sales. Selling and administrative expenses were 12 percent of sales. Amortization expense was $17,000 and interest expense for the year was $8,000 The firm's tax rate is 30 percent. a. Compute earnings after taxes using percentage-of-sales method. (Input all answers as positive values. Round your intermediate calculations to the nearest whole dollars.) CARR AUTO WHOLESALERS Income Statement For the Year Ended December 31, 20XX Sales $880000 Cost of goods sold 677600 Gross profit 202400 105600 Selling and administrative expense Amortization expense 17000 Operating profit 79800 Interest expense 8000 Earnings before taxes 87800 Taxes 26340 Earnings after taxes $161460 b-1. Assume the firm hires Ms. Hood, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 14 percent of sales, sales can be increased to $930,300. The extra sales effort will also reduce cost of goods sold to 73 percent of sales (There will be a larger mark-up in prices as a result of more aggressive selling). Amortization expense will remain at $17,000. However, more automobiles will have to be carried in inventory to satisfy customers, and interest expense will go up to $15,600. The firm's tax rate will remain at 30 percent. Compute revised earnings after taxes based on Ms. Hood's suggestions for Carr Auto Wholesalers. (Input all answers as positive values. Round your intermediate calculations to the nearest whole dollars.) CARR AUTO WHOLESALERS Income Statement For the Year Ended December 31, 20XXx 930300 Sales Cost of goods sold 679119 Gross profit 251181 Selling and administrative expense 130242 Amortization expense 17000 Operating profit 15600 Interest expense Earnings before taxes 88339 Taxes 26502 Earnings after taxes $61837Step by Step Solution
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