Question

Nataro, Incorporated, has sales of $668,000, costs of $330,000, depreciation expense of $74,000, interest expense of $47,000, a tax rate of 21 percent, and paid out $46,000 in cash dividends.

What is the addition to retained earnings? (Do not round intermediate calculations.)

Addition to retained earnings = $_______

Answer 1

Addition to retained earnings = $220,950

Step-by-step explanation:

Net Income = Sales - Costs - Depreciation - Interest = $668,000 - $330,000 - $74,000 - $47,000 = $217,000

Tax = (Net Income) x (Tax Rate) = $217,000 x 21% = $45,570

Net Income After Tax = Net Income - Tax = $217,000 - $45,570 = $171,430

Addition to Retained Earnings = Net Income After Tax - Dividends Paid = $171,430 - $46,000 = $220,950