The following account balances were drawn from the financial records of Kent Company (KC) as of January 1, 2016. Assets, $35,000; Liabilities, $6,000; Common Stock, $12,000; and Retained Earnings, $17,000. KC has agreed to pay the creditors $400 of interest per year. Further, KC agrees that for the 2016 fiscal year any annual earnings remaining after the interest charges will be paid out as dividends to the owners.

Required

a. Assuming KC earns a profit of $1,600 before recognition of interest expense during 2016; determine the amount of interest and dividends paid.

b. Assuming KC earns a profit of $900 before recognition of interest expense during 2016; determine the amount of interest and dividends paid.

c. Assuming KC earns a profit of $300 before recognition of interest expense during 2016; determine the amount of interest and dividends paid.