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Andersen's Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 35 percent. The firm paid out $23,400 in dividends. What is the addition to retained earnings

Respuesta :

Answer:

$34,645

Explanation:

Given that,

sales = $318,400

costs = $199,400

depreciation expense = $28,600

interest expense = $1,100

Tax rate = 35 percent

Dividends paid = $23,400

Profit before tax:

= Sales - cost - Depreciation - Interest

= $318,400 - $199,400 - $28,600 - $1,100

= $89,300

Profit after tax:

= Profit before tax (1 - Tax rate)

= $89,300 (1 - 0.35)

= $89,300 × 0.65

= $58,045

Therefore, the addition to retained earnings

= Profit after tax - Dividend paid

= $58,045 - $23,400

= $34,645

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