Question

Income Statement You have been given the following information for Corky's Bedding Corp.: a. Net sales $11,250,000. b. Cost of goods sold $7,500,000. c. Other operating expenses= $250,000. d. Addition to retained earnings = $1,000,000. e. Dividends paid to preferred and common stockholders $495,000. r. Interest expense= $850,000 The firm's tax rate is 35 percent. Calculate the depreciation expense for Corky's Bedding Corp. (LG2-1) 2-21

Answer 1

	CALCULATION OF THE DEPRECIATION EXPENSES
	Net Sales	$     1,12,50,000
	Less: Cost of Goods Sold	$         75,00,000
	Gross revenue	$         37,50,000
	Less Other Operrating Expenses	$           2,50,000
	Interest Expenses	$           8,50,000
	Net income before tax plus Depreciation expenses	$         26,50,000
	Less : Net income after taxes (Calculated as below)	$         23,00,000
	Depreiation expenses	$           3,50,000
	CALCULATION OF THE NET INCOME AFTER TAXES
	Addittion to retained earning	$         10,00,000
	Dividens paid to pref & Common shareshhodler	$           4,95,000
	This is Net income after tax	$         14,95,000
	Add: Income Tax ($ 14,95,000/65)X35	$           8,05,000
	Net income Befor Taxes	$         23,00,000
	Answer = Depreciation expenses = $ 350,000