Question

Griffin's goat farm, inc., has sales of $680,000, costs of $342,000, depreciation expense of $86,000, interest expense of $53,000, a tax rate of 23 percent, and paid out $40,000 in cash dividends. What is the addition to retained earnings? (do not round intermediate calculations.)

Answer 1

Addition to Retained Earnings will be the amount will be Net Income as calculated using the above information:

Net income will be calculated as below:

Sales...........................................................$680000

Less: Cost of Sales.................................$342000

Less: Depreciation..................................$86000

Less: Interest Expense.........................$53000

Earnings Before Tax...............................$199000

Less [email protected] 23%.........................................$45770

Net Income..............................................$153230

Thus Income of $153230 will be added to Retained earnings and Cash dividend of $40000 will be reduced from therein.