Question

Sidewinder, Inc., has sales of $670,000, costs of $337,000, depreciation expense of $82,000, interest expense of $47,000, and a tax rate of 24 percent. The firm paid out $77,000 in cash dividends and has 36,800 shares of common stock outstanding.
What is the addition to retained earnings?

Answer 1

Answer:

Additions to Retained earnings        $78,040

Explanation:

The additions to the retained earnings of Sidewinder, Inc can be calculated as follows

Sales                                               $670,000

Costs                                              ($337,000)

Depreciation expense                   ($82,000)

Interest expense                            ($47,000)

Profit before tax                              $204,000

Tax@24%                                         ($48,960)

Profit after tax                                  $155,040

Less:Dividends                                ($77,000)

Additions to Retained earnings      $78,040