Question

Assume sales are $7,990, cost of goods sold is $2,120, depreciation expense is $140, interest paid is $180, selling and general expenses are $360, dividends paid are $1,170, and the tax rate is 21 percent. What is the addition to retained earnings?

Group of answer choices

$2,005.80

$4,100.10

$2,930.10

$3,175.80

Answer 1

Solution :

The addition to retained earnings is = $ 2,930.10

The solution is option 3 = $ 2,930.10

Statement showing the calculation of addition to retained earnings
Sl.No.	Particulars	Amount
1	Sales	$                    7,990.00
2	Less : Cost of goods sold	$                   -2,120.00
3	Gross profit	$                    5,870.00
4	Less : Depreciation Expense	$                      -140.00
5	Less : Selling and general Expenses	$                      -360.00
6	Earnings before Interest and Tax	$                    5,370.00
7	Less : Interest expense	$                      -180.00
8	Earnings before tax	$                    5,190.00
9	Less : Taxes @ 21 % = $ 5,190 * 0.21	$ -1,089.90
10	Net Income	$                    4,100.10
11	Less : Dividends paid	$                   -1,170.00
12	Addition to retained earnings	$                    2,930.10