Question

You have been given the following information for Moore’s HoneyBee Corp.: a. Net sales = $44,000,000. b. Gross profit = $19,400,000. c. Other operating expenses = $3,400,000. d. Addition to retained earnings = $5,400,000. e. Dividends paid to preferred and common stockholders = $2,100,000. f. Depreciation expense = $2,000,000. The firm’s tax rate is 36 percent. Calculate the cost of goods sold and the interest expense for Moore’s HoneyBee Corp.

Answer 1

Net sales	44,000,000
Less:Cost of goods sold(balance)(44,000,000-19,400,000)	$24,600,000
Gross profit	19,400,000
Less:other operating expenses	(3,400,000)
Less:depreciation expense	(2,000,000)
Earnings before interest and taxes	$14,000,000
Less:interest(balance)(14,000,000-11,718,750)	$2281250
Earnings before taxes(100%)(7,500,000/0.64)	$11,718,750
Less:taxes@36%(11,718,750*0.36)	($4218750)
Net income(100-36=64%)(balance)(5,400,000+2,100,000)	$7,500,000
Less:Dividends paid to preferred and common stockholders	(2,100,000)
Additon to retained earnings	$5,400,000