Question

You have been given the following information for Nicole's Neckties Corp.: Net sales = $2,500,000; Cost of goods sold = $1,300,000; Addition to retained earnings = $30,000; Dividends paid to preferred and common stockholders = $300,000; Interest expense = $50,000. The firm's tax rate is 40 percent. What is the depreciation expense for Nicole's Neckties Corp.?

Answer 1

Answer:

$360,000

Explanation:

Net sales :                 $2,500,000

Cost of goods sold :  ($1,300,000)

Gross profit :              $ 1,200,000

Interest expense :          ($50,000)

Net profit :                  $ 1, 150,000

Retained earning:         ($30,000)

Dividends paid :           ($300,000)

Tax at 40%: =40% * $1,150,000

                                      ($460,000)

Depreciation expense : $360,000