Question

Thorkfeld Company incurred depreciation expenses of $28,900 last year. The sales were $755,000 and the addition to retained earnings was $10,200. The firm paid interest of $6,200 and dividends of $5,000. The tax rate was 33 percent. What was the amount of the costs incurred by the company

Answer 1

Answer:

Cost of Goods Sold is = $697213.44

Explanation:

given data

depreciation expenses = $28,900

sales = $755,000

retained earnings = $10,200

paid interest = $6,200

dividends = $5,000

tax rate = 33 percent

solution

first we get here EBIT that is express as here

EBIT =  Earnings for equity holders + Tax + Interest    ...............1

Earnings for equity holders = Dividend Paid + retained earnings

Earnings for equity holders = $5,000 + $10,200 = $15200

here Tax is = $\frac{15200}{67}$ × 33 = 7486.56

so here EBIT  = $15200 + $7486.56 + $6,200

EBIT  = $28886.56

so Cost of Goods Sold is = sales - depreciation -  EBIT   ..................2

Cost of Goods Sold is = $755,000 - $28,900 - $28886.56

Cost of Goods Sold is = $697213.44