Question

You have been given the following information for Kaye's Krumpet Corp.:
Net sales = $150,000;
Gross profit = $100,000;
Addition to retained earnings = $20,000;
Dividends paid to preferred and common stockholders = $8,000;
Depreciation expense = $50,000.
The firm's tax rate is 30 percent. What are the cost of goods sold and the interest expense for Kaye's Krumpet Corp.? explain by steps.

Answer 1

Gross Profits = Net sales - COGS

COGS = Net Sales - Gross Profits

= 150,000 - 100,000

= 50,000

Addition to Retained Earnings = Gross profits - Depriciation - Interest - Dividend

20,000 = 100,000 - 50,000 - Interest - 8,000

20,000 = 42000 - Interest

Interest = 42,000 - 20,000

Interest = 22,000

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