1. **State the problem:** Calculate the firm's net income given the income statement items: - Sales = 50,250,000 - Income tax = 1,744,000 - Operating expenses = 8,750,000 - Cost of goods sold = 35,025,000 - Interest expense = 750,000 2. **Calculate gross profit:** $$\text{Gross Profit} = \text{Sales} - \text{Cost of Goods Sold} = 50,250,000 - 35,025,000 = 15,225,000$$ 3. **Calculate operating income:** $$\text{Operating Income} = \text{Gross Profit} - \text{Operating Expenses} = 15,225,000 - 8,750,000 = 6,475,000$$ 4. **Calculate earnings before tax (EBT):** $$\text{EBT} = \text{Operating Income} - \text{Interest Expense} = 6,475,000 - 750,000 = 5,725,000$$ 5. **Calculate net income:** $$\text{Net Income} = \text{EBT} - \text{Income Tax} = 5,725,000 - 1,744,000 = 3,981,000$$ **Final answer:** The firm's net income is $3,981,000$.