Income Statement You have been given the following information for Romeo's Rockers Corp.: net sales = $5,200,000;
Cost of goods sold = $2,100,000;
Addition to retained earnings = $1,000,000;
Dividends paid to preferred and common stockholders = $400,000;
Interest expense = $200,000.
The firm's tax rate is 30 percent. What is the depreciation expense for Romeo's Rockers Corp.?
A) $900,000
B) $1,100,000
C) $1,500,000
D) $1,600,000

Question

Quizplus · Accepted Answer

Depreciation expense is not explicitly given in the income statement, but it can be calculated using the following formula:Depreciation expense = Net income - Dividends paid - Addition to retained earningsNet income = Net sales - Cost of goods sold - Interest expenseNet income = $5,200,000 - $2,100,000 - $200,000 = $2,900,000Depreciation expense = $2,900,000 - $400,000 - $1,000,000 = $1,500,000

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