Griffin's Goat Farm, Inc., has sales of $677,000, costs of $339,000, depreciation expense of $83,000, interest expense of $51,500, a tax rate of 25 percent, and paid out $41,500 in cash dividends.

 Griffin's Goat Farm, Inc., has sales of $677,000, costs of $339,000, depreciation expense of $83,000, interest expense of $51,500, a tax rate of 25 percent, and paid out $41,500 in cash dividends.


What is the addition to retained earnings?                            

The income statement for the company is:
  

Income Statement
  Sales    $    677,000 
  Costs         339,000 
  Depreciation         83,000 
    
  EBIT    $    255,000 
  Interest         51,500 
    
  EBT    $    203,500 
  Taxes (25%)         50,875 
    
  Net income    $    152,625 
    
  

One equation for net income is:

Net income = Dividends + Addition to retained earnings

Rearranging, we get:

Addition to retained earnings = Net income – Dividends
Addition to retained earnings = $152,625 – 41,500
Addition to retained earnings = $111,125