The Income Statement for Dobson Corporation Reported Net Income of $22,400

question 5

Essay

The income statement for Dobson Corporation reported net income of $22,400 for the year ended December 31 before considering the following:
During the year, the company purchased available-for-sale securities.
At year-end, the fair value of the investment portfolio was $2,100 more than cost.
The balance of Retained Earnings was $83,000 on January 1.
Dobson Corporation paid $9,000 in cash dividends during the year.
Calculate the balance of Retained Earnings on December 31.

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Definitions:

Variable Costs

Costs that change in proportion to the level of activity or production volume.

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance premiums.

Operating Income

A measure of a company's profit generated from its core business operations, excluding deductions of interest and tax.

Operating Leverage

An indicator of the extent to which increases in sales revenue result in an increase in operating profit, showing the level of fixed expenses within a business's cost composition.