Given the following information for O'Hara Marine Co., calculate the depreciation expense: sales = $77,000; costs...

Given the following information for O'Hara Marine Co., calculate the depreciation expense: sales = $77,000; costs = $39,000; addition to retained earnings = $10,800; dividends paid = $2,820; interest expense = $3,150; tax rate = 21 percent. (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)

Expert Solution

Step-1:Calcualtion of gross profit

	Gross profit	=	Sales	-	Cost of good sold
		=	$ 77,000	-	$ 39,000
		=	$ 38,000

Step-2:Calcualtion of net income

	Addition to retained earning		$ 10,800
	dividend paid		$ 2,820

	Net Income		$ 13,620

Step-3:Calculation of Earning Before interest and Taxes

	Net Income			a	$ 13,620
	Tax rate			b	21%
	Profit before tax			c=a/(1-b)	$ 17,241
	Interest expense			d	$ 3,150
	Earning before interest and taxes			e=c+d	$ 20,391

Step-3:Calculation of depreciation expense

	Gross Profit			a	$ 38,000
	Earning before interest and taxes			b	$ 20,391

	Depreciation Expense			c=a-b	$ 17,609

jeff jeffy answered 2 years ago

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