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20 December, 14:19

Deep Water Mining added $411 to retained earnings last year on sales of $24,646. The administrative expenses were $4,370, depreciation was $812, dividends paid were $285, and the interest expense was $103. What was the cost of goods sold if the firm's tax rate was 35 percent?

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  1. 20 December, 16:59
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    It is $18,290.24

    Explanation:

    Profit after Tax (65%) = addition to retained earnings+dividend paid

    = $411 + $285

    = $ 696

    Profit before Tax = [100/65] * $ 696

    = $1070.76

    Tax (35%) = 35% * $1070.76

    = $374.77

    Gross Profit = Profit before tax + Total expenses

    = $1070.76 + [ $4,370 + $103 + $812]

    = $6355.76

    Cost of Sales = $24,646 - $6355.76

    = $18,290.24.

    Note

    -Dividend is paid is paid from profit after tax
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