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?
A)$36,909
B)$34,645
C)$44,141
D)$37,208
E)$40,615

Question

Quizplus · Accepted Answer

To find the addition to retained earnings, first calculate the net income:  1. Earnings Before Tax (EBT) = Sales - Costs - Depreciation - Interest = $318,400 - $199,400 - $28,600 - $1,100 = $89,300.  2. Tax = EBT * Tax Rate = $89,300 * 0.35 = $31,255.  3. Net Income = EBT - Tax = $89,300 - $31,255 = $58,045.  4. Addition to Retained Earnings = Net Income - Dividends = $58,045 - $23,400 = $34,645.

Andersen's Nursery Has Sales of $318,400, Costs of $199,400, Depreciation