Question

Quinn, Inc.: sales = $68,500; costs = $51,700; addition to retained earnings = $4,500; dividends paid...

Quinn, Inc.: sales = $68,500; costs = $51,700; addition to retained earnings = $4,500; dividends paid = $3,420; interest expense = $3,210; tax rate = 21 percent. Calculate the depreciation expense. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

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Answer #1

Answer : Depreciation Expenses : $3565

Explanation :

First we will calculate Earning Before taxes :

Earning Before taxes = Net Income / (1 - tax rate)

Net Income (Addition to retained earning + Dividends paid) = 4500 + 3420

= 7920

Earning Before taxes = 7920 / (1 - 0.21)

= 10025.3164556

Earning Before Taxes = Earning Before Interest and Taxes - Interest expenses

==> Earning Before Interest and Taxes = Earning Before Taxes + Interest Expenses

= 10025.3164556 + 3210

= 13235.3164556

Earning Before Interest and Taxes = Sales - Costs - Depreciation

==> Depreciation = Sales - Cost -  Earning Before Interest and Taxes

= 68500 - 51700 - 13235.3164556

= 3564.6835444 or 3565

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