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Companies Generate Income from Their "Regular" Operations and from Other

question 62

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Companies generate income from their "regular" operations and from other sources like interest earned on the securities they hold,which is called non-operating income.Lindley Textiles recently reported $12,500 of sales,$7,250 of operating costs other than depreciation,and $1,000 of depreciation.The company had no amortization charges and no non-operating income.It had $8,000 of bonds outstanding that carry a 7.5% interest rate,and its federal-plus-state income tax rate was 40%.How much was Lindley's operating income,or EBIT?

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Definitions:

FOB Origin Pricing

A term used in shipping indicating that the buyer takes responsibility for shipping costs and risk of loss from the seller’s location.

Freight-Absorption Pricing

A pricing strategy where the seller absorbs all or part of the freight charges to encourage business in competitive markets or remote locations.

Resale Price Maintenance

An agreement between a supplier and a retailer in which the retailer agrees to sell a product at a specific price or above.

Discount Consumer Electronics

Retail or online stores offering electronic goods at reduced prices, typical of items that are surplus, refurbished, or off-season.

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