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Given the following info the Soprano Pizza Co., calculate the depreciation expense: sales = $21,000; costs...

Given the following info the Soprano Pizza Co., calculate the depreciation expense: sales = $21,000; costs = $10,000; addition to retained earnings = $4,000; dividends paid = $800; interest expense = $1,200; tax rate = 35%.

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Answer #1

ANSWER:

Let the depreciation expense be x

Particulars Amount($)
Sales 21,000
less: Cost (10,000)
Interest (1200)
Depreciation X
Earning before interest & tax 9800+X
Less: Tax@35% (3430+0.35X)
Earning after tax 6370+0.65X
Less:Dividend (800)
Retained Earning (Given) 4000

As we know,

(Earning after tax) - dividend = Retained Earning

(6370 + 0.65X )- 800 = 4000

5570 +0.65X =4000

5570-4000 = 0.65X

1570 =0.65X

X =1570 divided by 0.65

X=2415.38 or 2415

Hence the Depreciation Expense would be 2415

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