I really really need some help on this one!!! All I need is for someone to point me in the right direction. I have filled in the blanks of the income statement and figured out what the net income is. I am very stuck.
How do I get the depreciation expense based on this information:
sales = $51,700
costs = $39,100
addition to retained earnings = $2,925
dividends paid = $960
interest expense = $1,510
tax rate = 30 percent
Thank you for your help!!!
To find the depreciation expense, you will need some additional information. Depreciation expense is not directly provided in the information you have given. It is typically listed as a separate line item on the income statement.
However, you can still estimate the depreciation expense based on the given information and the formula for calculating net income. The formula is:
Net Income = Sales - Costs - Depreciation Expense - Interest Expense - Taxes
From the information provided, you have already calculated the net income.
Net Income = $2,925 (addition to retained earnings)
You also know the other components of the formula:
Sales = $51,700
Costs = $39,100
Interest Expense = $1,510
Tax Rate = 30%
Using this formula and the known values, you can rearrange the formula to solve for the unknown depreciation expense:
Depreciation Expense = Sales - Costs - Net Income - Interest Expense - Taxes
Plug in the values:
Depreciation Expense = $51,700 - $39,100 - $2,925 - $1,510 - (0.3 * Net Income)
Now, substitute the known value of Net Income:
Depreciation Expense = $51,700 - $39,100 - $2,925 - $1,510 - (0.3 * $2,925)
Calculate the depreciation expense using the numbers provided:
Depreciation Expense = $51,700 - $39,100 - $2,925 - $1,510 - $432.75
Depreciation Expense ≈ $7,732.25
Based on the given information, the estimated depreciation expense is approximately $7,732.25.