Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 21 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?

Question

Quizplus · Accepted Answer

The addition to retained earnings can be calculated by first determining the net income and then subtracting the dividends paid. Net income is calculated as follows: Net Income = (Sales - Costs - Depreciation - Interest) * (1 - Tax Rate)Plugging in the given values:Net Income = ($546,000 - $295,000 - $37,000 - $15,000) * (1 - 0.21) = $199,000 * 0.79 = $157,210Then, subtract the dividends paid to find the addition to retained earnings:Addition to Retained Earnings = Net Income - Dividends = $157,210 - $59,000 = $98,210

Beach Front Industries Has Sales of $546,000, Costs of $295,000