Addition to retained earnings: Hilton Company has revenues of $1,214,800 and costs of $816,355, and pays a tax rate of 32 per cent. If the company pays out 50 per cent of its earnings as dividends every year, what is the amount of retained earnings?

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The correct answer is A because the amount of retained earnings is calculated as follows:Retained earnings = Net income - DividendsNet income = Revenues - Costs - TaxesNet income = $1,214,800 - $816,355 - ($1,214,800 - $816,355) * 0.32Net income = $1,214,800 - $816,355 - $126,592Net income = $272,853Dividends = Net income * 0.50Dividends = $272,853 * 0.50Dividends = $136,426.50Retained earnings = $272,853 - $136,426.50Retained earnings = $136,426.50

Addition to Retained Earnings: Hilton Company Has Revenues of $1,214,800