Upton Industries has revenues of $42,629,interest expense of $1,230,depreciation of $2,609,cost of goods sold of $23,704,dividends paid of $1,200,and administrative expenses of $7,040.Assume the tax rate is 22 percent.What is the addition to retained earnings?

Question

Quizplus · Accepted Answer

Net income = Revenues - Cost of goods sold - Depreciation - Interest expense - Administrative expenses= $42,629 - $23,704 - $2,609 - $1,230 - $7,040= $8,046Addition to retained earnings = Net income - Dividends paid= $8,046 - $1,200= $6,846After-tax addition to retained earnings = $6,846 * (1 - 0.22)= $5,334.48Therefore, the addition to retained earnings is $5,334.48, which is closest to choice A, $5,075.88.

Upton Industries Has Revenues of $42,629,interest Expense of $1,230,depreciation of $2,609,cost