Question

Use the data from the following financial statements in the popup​ window. The company paid interest expense of $17,700 and had an overall tax rate of 40 % for 2017. Complete the statement of retained earnings for 2017​, and determine the dividends paid last year.

(Click on the following icon in order to copy its contents into a spreadsheet.) Partial Income Statement Year Ending 2017 Sales revenue $350,000 Cost of goods sold $141,900 Fixed costs $43,100 Selling, general, and administrative expenses $28,100 Depreciation $46,200 (Click on the following icon in order to copy its contents into a spreadsheet.) Partial Balance Sheet 12/31/2016 LIABILITIES ASSETS Cash $14,200 $19,100 Accounts receivable Inventories $190,200 $15,800 Notes payable $28,000 Accounts payable $48,200 Long-term debt $367,800 OWNERS' EQUITY $140,200 Retained earnings $82,100 Common stock Fixed assets Accumulated depreciation (-) Intangible assets $132,000 (Click on the following icon in order to copy its contents into a spreadsheet.) Partial Balance Sheet 12/31/2017 LIABILITIES ASSETS Cash $12,200 $23,800 $161,800 Accounts receivable Inventories Fixed assets Accumulated depreciation (-) Intangible assets $25,900 Notes payable $19,100 Accounts payable $52,800 Long-term debt $447,900 OWNERS' EQUITY Retained earnings $81,900 Common stock $182,000

Answer 1

Solution:

Calculation of Net Income after tax for the year ending 2017:

Income Statement Year Ending 2017
Sales Revenue		$350,000
Less: Cost of Goods Sold	$141,900
Fixed Costs	$43,100
Selling, general, and administrative expenses	$28,100
Depreciation	$46,200
Interest Expense	$17,700	$277,000
Net Income before taxes		$73,000
Less: Taxes @ 40%		$29,200
Net Income after taxes		$43,800

Calculation of Ending Retained Earnings for 2016 and 2017:

Ending Retained Earnings for 2016 = Total Assets - Total Liabilities - Common Stock

= $15,800 + $28,000 + $48,200 + ($367,800 - $140,200) + $82,100 - $14,200 - $19,100 - $190,200 - $132,000

= $46,200

Ending Retained Earnings for 2017 = Total Assets - Total Liabilities - Common Stock

= $25,900 + $19,100 + $52,800 + ($447,900 - $140,200 - $46,200) + $81,900 - $12,200 - $23,800 - $161,800 - $182,000

= $61,400

Calculation of Dividend paid for 2016:

Dividend Paid for 2016 = Ending Retained Earnings for 2016 + Net Income after taxes for 2017 - Ending Retained Earnings for 2017

= $46,200 + $43,800 - $61,400

= $28,600

Statement of Retained Earnings for 2017

Ending Retained Earnings for 2016	$46,200
Add: Net Income after taxes	$43,800
Less: Dividend Paid for 2016	$28,600
Ending Retained Earnings for 2017	$61,400