Patterson Brothers recently reported an EBITDA of $12.5 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest dollar, if necessary.
Patterson Brothers recently reported an EBITDA of $12.5 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest dollar, if necessary.
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Patterson Brothers recently reported an EBITDA of $12.5 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge
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EBITDA
$12,500,000
(Given)
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Depreciation
EBIT
6,500,000
Deprec. = EBITDA - EBIT = $12,500,000 - $6,000,000
$6,000,000
EBIT = EBT + Int. = $4,000,000 + $2,000,000
Interest
2,000,000
(Given)
EBT
$4,000,000
2,400,000
2,400,000
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(1-T)
0.6
Taxes(40%)
1,600,000
Taxes = EBT x Tax rate
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NI
$2,400,000
(Given)
Depreciation = EBITDA - EBIT = $12,500,000 - $6,000,000 = $6,500,000.
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Patterson Brothers recently reported an EBITDA of $12.5 million and net income of $2.4 million. It
$2.0
of interest expense, and its corporate tax rate was 40%. What was
its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations.
Round your answer to the nearest dollar, if necessary.
2$
6500000
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