Thorkfeld Company incurred depreciation expenses of $28,900 last year.The sales were $755,000 and the addition to retained earnings was $10,200.The firm paid interest of $6,200 and dividends of $5,000.The tax rate was 33 percent.What was the amount of the costs incurred by the company?

Question

Quizplus · Accepted Answer

To find the costs incurred, we first calculate the net income: Net Income = Addition to Retained Earnings + Dividends = $10,200 + $5,000 = $15,200. Then, calculate the Earnings Before Tax (EBT): EBT = Net Income / (1 - Tax Rate) = $15,200 / (1 - 0.33) = $22,686.57. Next, calculate Earnings Before Interest and Taxes (EBIT): EBIT = EBT + Interest = $22,686.57 + $6,200 = $28,886.57. Finally, calculate the costs: Costs = Sales - (EBIT + Depreciation) = $755,000 - ($28,886.57 + $28,900) = $697,213.43, which rounds to $697,213.

Thorkfeld Company Incurred Depreciation Expenses of $28,900 Last Year