1) PDQ Corp. has sales of $3,000,000; the firm’s cost of goods sold is $1,425,00
ID: 2751870 • Letter: 1
Question
1) PDQ Corp. has sales of $3,000,000; the firm’s cost of goods sold is $1,425,000; and its total operating expenses are $700,000. The firm’s interest expense is $230,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $30,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is PDQ's "Addition to Retained Earnings"?
2) The annual cost of not taking advantage of the 2/15, net 45 terms offered by a supplier is (Use a 360-day year):
Explanation / Answer
1. Addition to retained earning
2. Annual Cost of not taking advantage of 2/15, net 45 terms offered by supplier is 2% of COGS = ($ 28,500 * 360) / 30 = $ 342,000 on the assumption that all the goods are purchased on credit basis.
Particulars Amount Sales $ 3,000,000 Less: Cost of goods sold $ 1,425,000 Gross Profit $ 1,575,000 Less: -Operating expense $ 700,000 -Interest expense $ 230,000 Net Profit $ 645,000 Less: Tax $ 258,000 PAT $ 387,000 Less: Dividend To preferred stock $ 30,000 To common stock $ 60,000 Addition to Retained Earning $ 297,000Related Questions
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