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 as follows:Net income = Net sales - Cost of goods sold - Interest expense= $5,200,000 - $2,100,000 - $200,000= $2,900,000Addition to retained earnings = Net income - Dividends paid= $2,900,000 - $400,000= $1,000,000Depreciation expense = Net income - Addition to retained earnings= $2,900,000 - $1,000,000= $900,000

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