. Cumberland Industries' most recent sales were $455,000,000; operating costs (excluding depreciation) were equal to 85% of sale
s; net fixed assets were $67,000,000; depreciation amounted to 10% of net fixed assets; interest expenses were $8,550,000; the state-plus-federal corporate tax rate was 40% and Cumberland paid 25% of its net income out in dividends. Given this information, construct Cumberland's income statement. Also calculate total dividends and the addition to retained earnings.
1 answer:
Answer:
The total dividends and the addition to retained earnings is $7,950,000 and $2,3850,000 respectively.
Explanation:
Income statement : It is a statement which shows an income after deducting all expenses, taxes, interest and depreciation.
where,
Operating costs = 85% of sales
= 85% × $455,000,000
= $386,750,000
Depreciation = 10% of net fixed assets
= 10% × $67,000,000
= $6,700,000.00
Tax rate is applied on remaining balance
And,
EBITDA = Earning before interest, tax, depreciation and amortization
EBIT = Earning before interest and tax
EBT = Earning Before tax
Kindly find the attachment sheet in which the income statement is constructed.
The dividend is = 25 % of net income
= 25% × $31,800,000
= $7,950,000
Retained earning = Net income - dividend
= 31,800,000 - $7,950,000
= $2,3850,000
Hence, the total dividends and the addition to retained earnings is $7,950,000 and $2,3850,000 respectively.
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