Question

Assume sales are $14,570, cost of goods sold is $3,820, depreciation expense is $410, interest paid is $730, selling and general expenses are $960, dividends paid are $1,170, and the tax rate is 21 percent. What is the addition to retained earnings

Answer 1

Amount added to retained earnings $5,663.50

Step-by-step explanation:

The computation of the addition to the retained earning is shown below:

Sales $14,570

Less: Cost of goods sold -$3,820

Less: Depreciation -$410

Less: Interest paid -$730

Less: Selling and administration expenses -$960

Profit Before Tax $8,650

Less: Tax at 21% -1,816.50

Profit After tax $6,833.50

Less: Dividend paid -$1,170

Amount added to retained earnings $5,663.50