Question

Pharrell, Inc., has sales of $589,000, costs of $269,000, depreciation expense of $69,000, interest expense of $36,000, and a tax rate of 35 percent. The firm paid out $38,000 in cash dividends. What is the addition to retained earnings?

Answer 1

$101,750

Step-by-step explanation:

Pharell incorporation has a sales of $589,000

The cost is $269,000

The depreciation expense is $69,000

The interest expense is $36,000

The tax rate is 35 percent

The cash dividend paid out is $38,000

Therefore the additional retained earnings can be calculated as follows

= $589,000-$269,000-$69,000-$36,000

= $215,000

$215,000 × 35/100

$215,000 × 0.35

= $75,250

$215,000-$75,250-$38,000

= $101,750

Hence the additional retained earnings is $101,750