Question

Given the following information for Smashville, Inc., construct an income statement for the year: Cost of...

Given the following information for Smashville, Inc., construct an income statement for the year:

Cost of goods sold: $ 119,000
Investment income: $ 2,300
Net sales: $ 292,000
Operating expense: $ 40,000
Interest expense: $ 7,400
Dividends: $ 11,000
Tax rate: 40 %

  

What are retained earnings for the year?

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Answer #1

Given,

Cost of goods sold: $ 119,000
Investment income: $ 2,300
Net sales: $ 292,000
Operating expense: $ 40,000
Interest expense: $ 7,400
Dividends: $ 11,000
Tax rate: 40%

Solution :-

Net sales $292000
Less: Cost of goods sold ($119000)
Less: Operating expense ($40000)
Operating income $133000
Add: investment income $2300
Less: interest expense ($7400)
Pretax earnings $127900
Less: Taxes@40% ($51160)
Net income $76740

Retained earnings = Net income - Dividends

= $76740 - $11000 = $65740

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