Brewster's has annual sales of $11,800,dividends of $270,interest expense of $320,cost of goods sold of $7,230,addition to retained earnings of $510,selling and administrative expenses of $1,940,and a tax rate of 34 percent.What is the amount of the depreciation expense?

Question

Quizplus · Accepted Answer

Net income = $270 + $510 = $780
Taxable income = $780 / (1 - 0.34)= $1,181.82
Earnings before interest and taxes = $1,181.82 + $320 = $1,501.82
Depreciation = $11,800 - $7,230 - $1,940 - $1,501.82 = $1,128.18

Brewster's Has Annual Sales of $11,800,dividends of $270,interest Expense of $320,cost