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nataro, incorporated, has sales of $675,000, costs of $337,000, depreciation expense of $81,000, interest expense of $50,500, a tax rate of 23 percent, and paid out $42,500 in cash dividends. what is the addition to retained earnings? (do not round intermediate calculations.)

Sagot :

The addition to retained earning will be equal to $116505.

The total sales of Nataro Incorporated = $675000

Costs = $337000, Depreciation expense = $81000, Interest expense = $50500, Dividends = $42500 and tax rate = 23%

Earnings before taxes =Total sales - (Costs + Depreciation expense + Interest expense)

Earnings before taxes = $675000 - ($337000 + $81000 + $50500)

Earnings before taxes = $675000 - $468500

Earnings before taxes = $206500

Net Income = Earnings before taxes(1 - tax rate)

Net income = $206500(1 - 0.23)

Net income = $159005

Now, the addition to retained earnings will be

Addition to retained earnings = Net Income - Dividends

Addition to retained earnings = $159005 - $42500

Addition to retained earnings = $116505

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