The following data were taken from the records of Township Corporation at December 31 of the current year: Sales revenue $ 90,000 Gross profit 37,000 Selling (distribution) expense 5,700 Administrative expense? Pretax income 13,800 Income tax rate 35% Shares of stock outstanding 2,800

Administrative expense = $17,500

Explanation:

Administrative expense is classified as operating expense. It will be deducted from the gross profit to calculate the Pretax Income.

Sales revenue $90,000

Gross profit $37,000

Selling (distribution) expense ($5,700)

* Administrative expense ($17,500)

Pretax income $13,800

Income tax rate 35% ($4,830)

After Tax Income $8,970

Shares of stock outstanding 2,800

Pretax income is calculated as follow

Pretax Income = Gross profit - Selling (distribution) expense - Administrative expense

$13,800 = $37,000 - $5,700 - Administrative expense

$13,800 = $31,300 - Administrative expense

Administrative expense = $31,300 - $13,800

Administrative expense = $17,500