You have been given the following information for PattyCake’s Athletic Wear Corp. for the year 2015:
a. Net sales = $38,250,000;
b. Cost of goods sold = $22,070,000;
c. Other operating expenses = $5,300,000;
d. Addition to retained earnings = $1,195,500;
e. Dividends paid to preferred and common stockholders = $1,912,000;
f. Interest expense = $1,785,000;
g. The firm’s tax rate is 30 percent;
h. In 2016, net sales are expected to increase by $9.75 million;
i. Cost of goods sold is expected to be 60 percent of net sales;
j. Depreciation and other operating expenses are expected to be the same as in 2015;
k. Interest expense is expected to be $2,004,286;
l. The tax rate is expected to be 30 percent of EBT;
m. Dividends paid to preferred and common stockholders will not change.
Calculate the addition to retained earnings expected in 2016.