California Retailing Inc has sales of $4,000,000; the firm’s cost of g

California Retailing Inc has sales of $4,000,000; the firm’s cost of goods sold is $2,500,000; and its
total operating expenses are $600,000. The firm’s interest expense is $250,000, and the corporate tax
rate is 40%.

The firm paid dividends to preferred stockholders of $40,000, and the firm distributed
$60,000 in dividend payments to common stockholders. What is California Retailing’s “Addition to
Retained Earnings”?
A) $290,000 B) $390,000 C) $650,000 D) $330,000

ANSWER

A