The following account balances were drawn from the financial records of Kent Company (KC) as of January 1, Year 5: 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 Year 5 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 before interest expense recognition profit of $1,600 during Year 5, determine the amount of interest and dividends paid.

b. Assuming KC earns a before interest expense recognition profit of $900 during Year 5, determine the amount of interest and dividends paid.

c. Assuming KC earns a before interest expense recognition profit of $300 during Year 5, determine the amount of interest and dividends paid.