Question

You are given the following information for O'Hara Marine Co.: sales = $75,500; costs = $35,200; addition to retained earnings = $9,580; dividends paid = $8,420; interest expense = $2,620; tax rate = 23 percent. Calculate the depreciation expense.

Answer 1

O'Hara Marine Co.

Depreciation Expense is:

$13,903

Step-by-step explanation:

a) Data and Calculations:

sales = $75,500;

costs = $35,200;

addition to retained earnings = $9,580;

dividends paid = $8,420;

interest expense = $2,620;

tax rate = 23 percent

Net Income:

addition to retained earnings = $9,580;

dividends paid = $8,420

Total net income = $18,000

Pre-tax Income = $18,000/0.77 = $23,377

Income tax (23%) of $23,377 = $5,377

After Tax Income = $18,000 ($23,377 - 5,377)

Depreciation:

sales = $75,500

costs = $35,200

Gross profit = $40,300

Less interest (2,620)

Less net income (23,777)

Depreciation = $13,903