1) Caldweiler & Co

Answer:

1.

Average tax rate = Total taxes/Total income =

(21684 + 36)/(71509 + 100) = 0.30331 =

 30.331%

2.

Calculation of net Income for the year :

The formula for calculating the Net Income is :

Net Income = [ ( Sales – Costs - Depreciation – Interest paid ) * ( 1 – Tax rate ) ]

As per the information given in the question we have

Sales = $ 105,700   ; Costs = $ 78,300 ;   Depreciation = $ 9,000 ; Dividends = $ 1,200 ;

Interest paid = $ 635 ; Tax rate = 30 % = 0.30 ;

Applying the above information in the Net Income formula we have

= [ $ 105,700 - $ 78,300 - $ 9,000 - $ 635 ] * ( 1 – 0.30 )

= [ $ 105,700 - $ 78,300 - $ 9,000 - $ 635 ] * 0.70

= $ 17,765 * 0.70

= $ 12,435.50

Thus Net Income is = $ 12,435.50

Calculation of retained earnings balance at the end of the year :

The formula for calculating the retained earnings balance for the year is

= Beginning retained earnings of the year + Net income of the year – dividend paid

As per the information available we have

Beginning retained earnings of the year = $ 24,600 ; Net income of the year = $ 12,435.50 ; Dividend paid = $ 1,200 ;

Applying the above information in the formula we have the retained earnings balance at the end of the year as :

= $ 24,600 + $ 12,435.50 - $ 1,200

= $ 35,835.50

= $ 35,836 ( when rounded off to the nearest dollar )

Thus the retained earnings balance at the end of the year = $ 35,836