Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 32 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings

$76,320

Explanation:

Given that,

sales = $546,000,

costs = $295,000,

depreciation expense = $37,000,

interest expense = $15,000,

Tax rate = 32 percent

Profit before tax:

= Sales - cost - Depreciation - Interest

= $546,000 - $295,000 - $37,000 - $15,000

= $199,000

Profit after tax:

= Profit before tax (1 - Tax rate)

= $199,000 (1 - 0.32)

= $199,000 × 0.68

= $135,320

Therefore, the addition to retained earnings

= Profit after tax - Dividend paid

= $135,320 - $59,000

= $76,320