Question

Stein Books Inc. sold 1,900 finance textbooks for \(250 each to High Tuition University in 20X1. These books cost \)210 to produce. Stein Books spent \(12,200 (selling expense) to convince the university to buy its books. Depreciation expense for the year was \)15,200. In addition, Stein Books borrowed $104,000 on January 1, 20X1, on which the company paid 12 percent interest. Both the interest and principal of the loan were paid on December 31, 20X1. The publishing firm’s tax rate is 30 percent. Did Stein Books make a profit in 20X1? Please verify with an income statement.

Short answer

Stein Books Inc. makes profit in 20X1 amounting to $25,284

Step-by-step solution

The information provided in the question are

Sales (1,900 x $250)	$475,000
Cost of sales (1,900 x $210)	399,000
Selling expenses	12,200
Depreciation expense	15,200
Interest expenses (12% of $104,000)	12,480
Tax rate	30%

Income statement for the Stein Books Inc

Particulars	Amount ($)
Sales	475,000
Less: Cost of sales	399,000
Gross Profit	76,000
Less: Selling expense	12,200
Less: Depreciation	15,200
Operating Profit	48,600
Less: Interest expense	12,480
Earning before tax	36,120
Less: Tax (30% of EBT)	10,836
Earning after tax	25,284