Net sales $3,800,000
Cost of goods sold 3,000,000
Gross profit 800,000
Operating expenses (excl. depreciation) 400,000
Depreciation expense 100,000
Operating income 300,000
Interest expense 200,000
EBT 100,000
Taxes 40,000
Net income 60,000
Notes: Net sales = Gross sales – Returns and Allowances = (10,000) ($400) – 200,000.
Cost of goods sold = # units sold x Cost per unit = (10,000) ($300).
Interest expense = (Debt outstanding) (Average interest rate) = ($2,000,000) (.10).
Taxes = (EBT) (Tax rate) = ($100,000) (.40).