Chevelle, Inc. has sales of $487,000 and costs of $394,500. The depreciation expense is $43,800. Interest paid equals $18,200 and dividends paid equal $6,500. The tax rate is 35 percent. What is the addition to retained earnings?

Question

Karley Riggs

Business

1 July, 23:15

Chevelle, Inc. has sales of $487,000 and costs of $394,500. The depreciation expense is $43,800. Interest paid equals $18,200 and dividends paid equal $6,500. The tax rate is 35 percent. What is the addition to retained earnings?

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Answers (1)

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Emilia Boyer · Answer 1

The correct answer is $13,325.

Explanation:

According to the scenario, the given data are as follows:

Total sales = $487,000

Cost of goods sold = $394,500

Depreciation expense = $43,800

Interest paid = $18,200

dividends paid = $6,500

Tax rate = 35%

so, first we calculate net income.

Net income = (Total sales - Cost of goods sold - Depreciation expense - Interest paid) - 35%

= ($487,000 - $394,000 - $43,800 - $18200) - 35%

= $30,500 - $10,675

= $19,825

Addition to retained earnings = Net income - Dividends Paid

= $19,825 - $6,500

= $13,325

Hence, the correct answer is $13,325.