In 2018, Thompsons, Inc. (a retail clothing company) sold 82,000
units of its product at an average price of $350.00 per unit. The
company reported estimated returns and allowances in 2018 of 1.25
percent of gross revenue. Thompsons actually purchased 85,000 units
of its product from its manufacturer in 2018 at an average cost of
$200.00 per unit. Thompsons began 2018 with 1250 units of its
product in inventory (carried at an average cost of $200.00 per
unit). Operating expenses (excluding depreciation) for Thompsons,
Inc. in 2018 were $8,500,000 and depreciation expense was $750,000.
Thompsons had $12,000,000 in debt outstanding throughout all of
2018. This debt carried an average interest rate of 7.5 percent.
Finally, Thompsons’ tax rate was 35 percent. Thompsons’ fiscal year
runs from January 1 through December 31. Given this information,
compute net income for Thompsons for 2018.
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