Hayes Bakery has sales of $30,600,costs of $15,350 an addition to retained earnings of $4221, dividends paid of $469, interest expense of $1,300, and a tax rate of 21 percent. what is the amount of the depreciation expense? (show the process)

a. $4,820.13

b. $5,500.89

c. $8013.29

d. $8,180.01

e. $9,500.00

c. $8013.29

Explanation:

The retained earnings is the accumulated net earnings/losses over the period of existence of an entity. This is usually posted to the retained earnings accounted for as part of owners equity on the face of the balance sheet net the dividend paid.

The net income is the difference between the sales and all expenses including depreciation.

Let the depreciation be d

Net income = retained earnings + dividend

= $4221 + $469

= $4,690

$4,690 = 0.79 ($30,600 - $15,350 - $1,300 - d)

The 0.79 being the net of the tax which is the 21% applied on the net of sales and expenses.

d = $13,950  - $5,936.71

d = $8,013.29

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