Question

Smashed Pumpkins Co. paid $192 in dividends and $617 in interest over the past year. The company increased retained earnings by $516 and had accounts payable of $678. Sales for the year were $16,510 and depreciation was $748. The tax rate was 35 percent. What was the company's EBIT

Answer 1

Answer:

See below

Explanation:

Dividends paid last year = $192

Retained earnings = $516

Net income = Retained earnings + Dividend paid

= $516 + $192

= $708

Tax rate = 35%

Earnings before tax EBT = Net income / 1 - Tax rate

= $708 / 1 - 0.35

= $1,089

Interest expense = $617

Earnings before interest and tax EBIT = EBT + Interest expense

= $1,089 + $617

= $1,706