Question

The following account balances were drawn from the financial records of Kerr Company (KC) as of January 1, 2013. Assets, $25,000; Liabilities, $8,000; Common Stock, $10,000; and Retained Earnings, $7,000. Kerr has agreed to pay the creditors $600 of interest per year. Further, Kerr agrees that for the 2013 fiscal year, any annual earnings remaining after the interest charges will be paid out as dividends to the owners.

Required
a. Assuming Kerr earns a before interest expense recognition profit of $1,500 during 2013, determine the amount of interest and dividends paid.
b. Assuming Kerr earns a before interest expense recognition profit of $800 during 2013, determine the amount of interest and dividends paid.
c. Assuming Kerr earns a before interest expense recognition profit of $400 during 2013, determine the amount of interest and dividends paid.



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  • CreatedOctober 12, 2013
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