You are given the following information for Sookie's Cookies Co.: sales = $51,200; costs = $39,600; addition to retained earnings = $2,320; dividends paid = $935; interest expense = $1,560; tax rate = 40 percent. Calculate the depreciation expense for the company.

The depreciation expense for the company is $4615.

Explanation:

profit before depreciation and tax = (sales - cost) - interest expense

= ($51,200 - $39,600) - $1,560

= $10040

Addition to retained earnings = $2,320

dividends paid = $935

tax rate = 40 percent.

Addition to retained earnings = [ (Profit before depreciation and tax - depreciation expense) * (1 - Tax) ] - dividend paid

$2320 = [ ($10040 - depreciation expense) * (1 - 0.40) ] - 935

$3255 = ($10040 - depreciation expense) * 0.60

$5425 = $10040 - depreciation expense

Depreciation expense = 10040 - 5425

= $4615

Therefore, The depreciation expense for the company is $4615.