Kahlan Opinion Surveys had beginning retained earnings of $24,600. During the year, the company reported sales of $105,700, costs of $78,300, depreciation of $9,000, dividends of $1,200, and interest paid of $635. The tax rate is 30 percent. What is the retained earnings balance at the end of the year?

Question

Justice Nichols

Business

10 March, 09:20

Kahlan Opinion Surveys had beginning retained earnings of $24,600. During the year, the company reported sales of $105,700, costs of $78,300, depreciation of $9,000, dividends of $1,200, and interest paid of $635. The tax rate is 30 percent. What is the retained earnings balance at the end of the year?

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Humberto Harvey · Answer 1

The retained earnings balance at the end of the year is $35,835.5

Explanation:

Income before tax (taxable income) = Sales - Costs - Depreciation expense - Interest expense = $105,700 - $78,300 - $9,000 - $635 = $17,765

The tax rate is 30 percent. The amount of tax the company had to pay:

$17,765 x 30% = $5,329.5

Net income = Income before tax - Tax = $17,765 - $5,329.5 = $12,435.5

The retained earnings balance at the end of the year = Beginning balance in retained earnings + Net income - Cash dividends - Stock dividends = $24,600 + $12,435.5 - $1,200 = $35,835.5