The owner of a bicycle repair shop forecasts revenues of $164,000 a year. Variable costs will be $51,000, and rental costs for the shop are $31,000 a year. Depreciation on the repair tools will be $11,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%.

The answer is $56,800

Explanation:

Profit Before Tax (PBT) =

Revenue = $164,000

Rental Costs = $31,000

Variable Costs = $51,000

Depreciation = $11,000

Tax rate = 20%

Revenue - Rental costs - Variable costs - Depreciation

= $164,000 - $31,000 - $51,000 - $11,000

$71,000

Tax paid is 0.2 x $71,000

=$14,200

Profit After Tax (PAT) = $71,000 - $14,200

= $56,800

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