Ajax enterprises, Inc has the following income statement items: sales of $48,250,000; operating expenses of $10,225,000; cost of goods sold of $32,025,000; and interest expense of $650,000

If the firm's income tax rate is 34%, what is the amount of the firm's income tax liability?
A) $1,665,000
B) $2,040,000
C) $1,819,000
D) $1,385,000

C
Explanation: C) Tax liability = EBT * Tax rate = (Sales - COGS - Operating Expenses - Interest Expense)*Tax rate = ($48,250,000 - $32,025,000 - $10,225,000 - $650,000 ) * .34 = $1,819,000.