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You are given the following information for Ted’s Dread Co.: sales = $68,500; costs = $51,700; addition to retained earnings = $4,500; dividends paid = $2,420; interest expense = $2,130; tax rate = 21 percent. Calculate the depreciation expense. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Respuesta :

Tundexi

Answer:

$5,910.50

Explanation:

Net income = Dividends + Addition to retained earnings

Net income = $2,420 + $4,500

Net income = $6,920

Taxable income = Net income / (1 - Tax rate)

Taxable income = $6,920 / (1 - 0.21)

Taxable income = $6,920 / 0.79

Taxable income = 8759.4937

Taxable income = $8,759.50

EBIT = Taxable income + Interest

EBIT = $8,759.50 + $2,130

EBIT = $10,889.50

Depreciation = Sales - Costs - EBIT

Depreciation = $68,500 - $51,700 - $10,889.50

Depreciation = $5,910.50

So, the depreciation expense for Ted’s Dread Co is $5,910.50.

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