Madison Metals recently reported $9,000 of sales, $6,000 of operating costs other than depreciation, and $1,500 of depreciation. The company had no amortization charges and no non-operating income. It had issued $4,000 of bonds that carry a 7% interest rate, and its federal-plus-state income tax rate was 40%. What was the firm's taxable, or pre-tax, income?

If you're looking for pre-tax income, then their tax rate of 40% is not relevant to the problem. The only expense that need calculating is the interest. You haven't stated if the bonds were outstanding for the entire year, but assuming they were, there would be $280 of interest (4000 x 7%). So then you've got 9,000 sales less 6,000 operating costs, less $1500 depreciation, less $280 in interest, for a pre-tax income of $1,220.