Question

problem 2-23 Incone statement

you have been given the following information for Corkys Besding Corp

a. net sales $1120000

b. cost of goods $ 7,800,000

c. other operating expenses $140000

d. addition ti retained earnings $1,110,000

e. dividends paid to preferred and commin stickholders $320,000

f. interest expense$860,000, all which is tax dedctible

the firms tax rate is 21 percent

calculate the depreciation expense

Answer 1

Net income = Common and preferred stock dividend + Addition to retained earnings

= 320000+ 1100000

= 1420000

EBT (1 – Tax rate) = Net income => EBT = Net income/(1 – Tax rate)

= 1420000/(1-0.21)

= 1797468

EBIT - interest = EBT

EBIT = EBT + Interest

= 1797468 + 860000

= 2657468

Gross profits = Net sales – Cost of goods sold

= 11200000- 7800000

= 3400000

Gross profits – Depreciation – Other operating expenses = EBIT

Depreciation = Gross profits – Otheroperating expenses – EBIT

= 3400000- 140000-2657468

= 602531

Pls do rate, if the answer is correct and comment, if any further assistance is required