Question

Sidewinder, Inc., has sales of $686,723, costs of $335,000, depreciation expense of $80,000, interest expense of $45,000, and a tax rate of 22 percent. The firm paid out $81,093 in cash dividends. What is the addition to retained earnings

Answer 1

The addition to retained earnings is $95,751.

Step-by-step explanation:

Addition to the retained earning is the net value of net earning of the year and dividend payment.

Net income

Sales $686,723

Costs ($335,000)

Gross income $351,723

Depreciation Expense ($80,000)

Income before interest and tax $271,723

Interest Expense ($45,000)

Income before tax $226,723

Tax 22% ($49,879)

Net Income $176,844

Addition to Retained Earning = Net Income - Dividend Payment

Addition to Retained Earning = $176,844 - $81,093

Addition to Retained Earning = $95,751