Question

Papa Roach Exterminators, Inc., has sales of $644,000, costs of $345,000, depreciation expense of $54,000, interest expense of $26,000, and a tax rate of 35 percent. If the firm paid out $71,000 in cash dividends. What is the addition to retained earnings

Answer 1

$71,350

Step-by-step explanation:

We have the following income statement:

Sales $644,000

Costs ($345,000)

Depreciation expense ($54,000)

Interest expense ($26,000)

Taxable Income $219,000

Tax rate 35% ($76,650)

After tax income $142,350

Dividends paid ($71,000)

Retained earnings $71,350

So, as we can see, the addition to retained earnings is $71,350