You are given the following information for Calvani Pizza Co.: sales = $42,000;

Question

You are given the following information for Calvani Pizza Co.: sales = $42,000; costs = $22,200; addition to retained earnings = $5,350; dividends paid = $1,800; interest expense = $4,600; tax rate = 35 percent. Calculate the depreciation expense. (Do not round intermediate calculations and round your final answer to nearest whole dollar amount.)

You are given the following information for Calvani Pizza Co.: sales = $42,000; costs = $22,200; addition to retained earnings = $5,350; dividends paid = $1,800; interest expense = $4,600; tax rate = 35 percent. Calculate the depreciation expense. (Do not round intermediate calculations and round your final answer to nearest whole dollar amount.)

Explanation / Answer

Net income = Dividends + Addition to retained earnings

Net income = $1,800 + 5,350

Net income = $7,150

Now, after looking at income statement:

EBT EBT × Tax rate = Net income

Recognize that EBT × Tax rate is simply the calculation for taxes.

So, EBT yields:

EBT = NI / (1 Tax rate)

EBT = $7,150 / (1 0.35)

EBT = $11,000

So,

EBIT = EBT + Interest

EBIT = $11,000 + 4,600

EBIT = $15,600

Now, the last step for deprecation expense calculation as follow....

EBIT = Sales Costs Depreciation

$15,600 = $42,000 22,200 Depreciation

Depreciation Expense = $4,200

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