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Higgins, Inc., has sales of $529,100, costs of $301,500, depreciation expense of $43,600, interest expense of...

Higgins, Inc., has sales of $529,100, costs of $301,500, depreciation expense of $43,600, interest expense of $21,700, a tax rate of 23 percent, and paid out $29,600 in cash dividends.

a. What is the net income for the firm? (Do not round intermediate calculations.)

b. What is the addition to retained earnings? (Do not round intermediate calculations.)

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Answer #1

a) Preparing the Income Statement to determine the Net Income of Higgins Inc:-

Particular Amount (in $)
Sales 529,100
Less: Costs (301,500)
Gross Profit 227,600
Less: Depreciation (43,600)
EBIT 184,000
Less: Interest (21,700)
EBT 162,300
Less: Tax@23% (37,329)
Net income 124,971

So, Net Income of the firm is $124,971

b). Additions to Retained Earnings = Net Income - Cash Dividend paid

=$124,971 - $29,600

=$95,371

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