You have been given the following information for Corky's Bedding Corp.: Net sales = $15,250,000; Cost of goods sold = $5,750,000; Addition to retained earnings = $4,000,000; Dividends paid to preferred and common stockholders = $995,000; Interest expense = $1,150,000. The firm's tax rate is 30 percent. Calculate the depreciation expense for Corky's Bedding Corp.
A)$1,210,000
B)$1,970,000
C)$1,520,000
D)$1,725,000

Question

Quizplus · Accepted Answer

Depreciation expense = Net income - Addition to retained earnings - Dividends paid to preferred and common stockholders + Interest expense= (Net sales - Cost of goods sold - Interest expense) * (1 - Tax rate) - Addition to retained earnings - Dividends paid to preferred and common stockholders + Interest expense= ($15,250,000 - $5,750,000 - $1,150,000) * (1 - 0.30) - $4,000,000 - $995,000 + $1,150,000= $1,210,000

You Have Been Given the Following Information for Corky's Bedding