You have been given the following information for Kellygirl’s Athletic Wear Corp

Question

You have been given the following information for Kellygirl’s Athletic Wear Corp. for the year 2015: a. Net sales = $38,300,000. b. Cost of goods sold = $22,100,000. c. Other operating expenses = $5,200,000. d. Addition to retained earnings = $1,198,500. e. Dividends paid to preferred and common stockholders = $1,913,000. f. Interest expense = $1,790,000. g. The firm’s tax rate is 30 percent. h. In 2016, net sales are expected to increase by $9.30 million. i. Cost of goods sold is expected to be 60 percent of net sales. j. Depreciation and other operating expenses are expected to be the same as in 2015. k. Interest expense is expected to be $2,065,000. l. The tax rate is expected to be 30 percent of EBT. m. Dividends paid to preferred and common stockholders will not change. Calculate the addition to retained earnings expected in 2016. (Enter your answer in dollars, not millions.) You have been given the following information for Kellygirl’s Athletic Wear Corp. for the year 2015: a. Net sales = $38,300,000. b. Cost of goods sold = $22,100,000. c. Other operating expenses = $5,200,000. d. Addition to retained earnings = $1,198,500. e. Dividends paid to preferred and common stockholders = $1,913,000. f. Interest expense = $1,790,000. g. The firm’s tax rate is 30 percent. h. In 2016, net sales are expected to increase by $9.30 million. i. Cost of goods sold is expected to be 60 percent of net sales. j. Depreciation and other operating expenses are expected to be the same as in 2015. k. Interest expense is expected to be $2,065,000. l. The tax rate is expected to be 30 percent of EBT. m. Dividends paid to preferred and common stockholders will not change. Calculate the addition to retained earnings expected in 2016. (Enter your answer in dollars, not millions.) You have been given the following information for Kellygirl’s Athletic Wear Corp. for the year 2015: a. Net sales = $38,300,000. b. Cost of goods sold = $22,100,000. c. Other operating expenses = $5,200,000. d. Addition to retained earnings = $1,198,500. e. Dividends paid to preferred and common stockholders = $1,913,000. f. Interest expense = $1,790,000. g. The firm’s tax rate is 30 percent. h. In 2016, net sales are expected to increase by $9.30 million. i. Cost of goods sold is expected to be 60 percent of net sales. j. Depreciation and other operating expenses are expected to be the same as in 2015. k. Interest expense is expected to be $2,065,000. l. The tax rate is expected to be 30 percent of EBT. m. Dividends paid to preferred and common stockholders will not change. Calculate the addition to retained earnings expected in 2016. (Enter your answer in dollars, not millions.)

Explanation / Answer

For 2015:

Let depreciation be x

Then addition to retained earnings will be =(38300000-22100000-1790000-5200000-x)*0.7-1913000

Hence,

1198500=(38300000-22100000-1790000-5200000-x)*0.7-1913000

=>x=4765000

For 2016:

Addition to retained earnings=((38300000+9300000)*0.4-2065000-5200000-4765000)*0.7-1913000=2994000

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