Income Statement You have been given the following information for Fina's Furniture Corp.: net sales = $25,500,000;
Cost of goods sold = $10,250,000;
Addition to retained earnings = $305,000;
Dividends paid to preferred and common stockholders = $500,000;
Interest expense = $2,000,000.
The firm's tax rate is 30 percent. What is the depreciation expense for Fina's Furniture Corp?
A) $12,100,000
B) $12,400,000
C) $14,100,000
D) $14,400,000

Question

Quizplus · Accepted Answer

Depreciation expense is not explicitly given, so we need to calculate it using the other information provided.Net income = Net sales - Cost of goods sold - Interest expenseNet income = $25,500,000 - $10,250,000 - $2,000,000Net income = $13,250,000Addition to retained earnings = Net income - Dividends paid$305,000 = $13,250,000 - $500,000Dividends paid = $12,945,000Depreciation expense = Net income - Dividends paid - TaxesDepreciation expense = $13,250,000 - $12,945,000 - ($13,250,000 * 0.30)Depreciation expense = $12,100,000

Income Statement You Have Been Given the Following Information for Fina's