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6 September, 14:47

Given the following information for O'Hara Marine Co., calculate the depreciation expense: sales = $38,000; costs = $21,000; addition to retained earnings = $5,000; dividends paid = $1,500; interest expense = $5,000; tax rate = 35 percent.

Calculate the depreciation expense. (Do not round intermediate calculations.) Depreciation expense $

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  1. 6 September, 16:18
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    Depreciation expense $2,000

    Explanation:

    Sales less cost less depreciation less interest less tax = retained earnings plus dividend paid

    sales = $38,000

    Costs = $21,000

    addition to retained earnings = $5,000

    dividends paid = $1,500

    interest expense = $5,000

    tax rate = 35 percent.

    Let the depreciation be d

    38000 - 21000 - 5000 - d - 0.35 (38000 - 21000 - 5000 - d) = 5000 + 1500

    0.65 (38000 - 21000 - 5000 - d) = 6500

    38000 - 21000 - 5000 - d = 10000

    d = 38000 - 21000 - 5000 - 10000

    d = 2000

    Depreciation expense $2,000.
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