Question

Deep Water Mining added $411 to retained earnings last year on sales of $24,646. The administrative expenses were $4,370, depreciation was $812, dividends paid were $285, and the interest expense was $103. What was the cost of goods sold if the firm’s tax rate was 35 percent?

Answer 1

It is $18,290.24

Step-by-step explanation:

Profit after Tax (65%) = addition to retained earnings+dividend paid

= $411 + $285

= $ 696

Profit before Tax = [100/65] * $ 696

= $1070.76

Tax (35%) = 35% * $1070.76

= $374.77

Gross Profit = Profit before tax + Total expenses

= $1070.76 + [ $4,370+ $103+ $812]

= $6355.76

Cost of Sales= $24,646 -$6355.76

= $18,290.24 .

Note

-Dividend is paid is paid from profit after tax