You are given the following information for Gandolfino Pizza Co.: sales = $42,00

Question

You are given the following information for Gandolfino Pizza Co.: sales = $42,000; costs = $21,300; addition to retained earnings = $7,250; dividends paid = $1,200; interest expense = $5,300; tax rate = 35 percent. Calculate the depreciation expense.

You are given the following information for Gandolfino Pizza Co.: sales = $42,000; costs = $21,300; addition to retained earnings = $7,250; dividends paid = $1,200; interest expense = $5,300; tax rate = 35 percent. Calculate the depreciation expense.

Explanation / Answer

Depreciation = 2400 Addition to retained Earnings        7,250.00 Dividend Paid        1,200.00 Total Earning available for Equity        8,450.00 Sales      42,000.00 Costs      21,300.00 Income before dep,intt and tax      20,700.00 Interest        5,300.00 Income before dep and tax      15,400.00 Let depreciation be   x Income beforetax 15400 - x Tax @35% 5390 - .35x Income after tax for equity 10,010 - .65x 10010 - .65x = 8450 1560 = .65x Depreciation = x = $2,400

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