Question

Pharrell, Inc., has sales of $592,000, costs of $266,000, depreciation expense of $67,500, interest expense of $34,500, and a tax rate of 40 percent. The firm paid out $39,500 in cash dividends. What is the addition to retained earnings? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Addition to retained earnings?

Answer 1

Addition to retained earnings $94,900

Step-by-step explanation:

Data provided in the question:

sales = $592,000

costs = $266,000

depreciation expense = $67,500

interest expense = $34,500

tax rate = 40%

Dividends paid = $39,500

Now,

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Sales $592,000

less:

costs $266,000

Depreciation $67,500

Interest expense $34,500

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Earnings before tax $224,000

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Less: tax @40% $89,600

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Net income $134,400

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Less: dividends $39,500

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Addition to retained earnings $94,900

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