Sales at Nguyen Systems were $830,000. The firm had an income tax rate of 22 percent...

Sales at Nguyen Systems were $830,000. The firm had an income tax rate of 22 percent and a net profit margin of 20.75 percent. The company paid out $80,000 in dividends. Retained earnings at the end of the year was $145,000. What was retained earnings at the beginning of the year?

Expert Solution

Sales= $830,000

Net profit margin= 20.75%

Net profit margin formula= [Net profit/Sales]*100

So, Net profit= Net profit margin*Sales

= 20.75%* $830,000

= $172,225

Retained earnings at the end of the year= Retained earnings at the beginning of the year+Net profit-Dividend paid

So, Retained earnings at the beginning of the year= Retained earnings at the end of the year-Net profit+Dividend paid

Retained earnings at the beginning of the year= $145,000-$172,225+$80,000

= $52,775

jeff jeffy answered 2 years ago

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