You are given the following information for Bowie Pizza Co. Sales = $64,000; Costs = $30,700,...

Question

Question

Answer 1

Answer #1

Solution:
Given:
Sales	$64000
Costs	$30700
Additions to retained earnings	$5700
Dividend	$1980
Interest	$4400
Tax rate	22%

Net income = Dividends +Addition to retained earnings
Net income = $1980+$5700
Net income = $7680

Earnings before tax = Net income/(1-Tax rate)
$7680/(1-0.22)
$7680/(0.78)
9846.153846
Earnings before tax = $9846.15

EBIT = EBT +Interest
$9846.15+$4400
EBIT = $14246.15

EBIT = Sales - Costs -Depreciation
$14246.15 = $64000-$30700 - Depreciation
$64000-$30700-$14246.15 = Depreciation
19053.85
$19054

Depreciation Expense = $19054

Answer 2

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