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Pharrell, Inc., has sales of $601,000, costs of $257,000, depreciation expense of $30,000, and a tax...

Pharrell, Inc., has sales of $601,000, costs of $257,000, depreciation expense of $30,000, and a tax rate of 35 percent. The firm paid out $44,000 in cash dividends.

What is the addition to retained earnings?

Addition to retained earnings $-------

Expert Solution

Given the following information regarding Pharrell Inc.,

Sales = $601,000

Costs = $257,000

Depreciation expense = $30,000

tax rate = 35% = 0.35

Cash dividends = $44,000

Addition to retained earnings = ?

Step 1:

Calculation of Earnings before interest and tax,

EBIT = 314000

Step 2:

Calculation of Net Income,

Net Income = 204100

Step 3:

Calculation of addition to retained earnings,

Therefore, the addition to retained earnings is $1,60,100

jeff jeffy answered 2 years ago

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