You are given the following information for Troiano Pizza Company: sales = $80,200; costs = $56,900; addition to retained earnings = $7,100; dividends paid = $3,200; interest expense = $2,910; tax rate = 23 percent. Calculate the depreciation expense for the company.

We can calculate the depreciation expense for Troiano Pizza Company by using the following financial relationships:

### Step 1: Formula for Net Income
The net income is the sum of addition to retained earnings and dividends paid:
\[
\text{Net Income} = \text{Addition to Retained Earnings} + \text{Dividends Paid}
\]
Substitute the given values:
\[
\text{Net Income} = 7,100 + 3,200 = 10,300
\]

### Step 2: Formula for Earnings Before Tax (EBT)
To find Earnings Before Tax (EBT), we can use the tax rate formula:
\[
\text{Net Income} = \text{EBT} \times (1 - \text{Tax Rate})
\]
Rearranging the equation to solve for EBT:
\[
\text{EBT} = \frac{\text{Net Income}}{1 - \text{Tax Rate}}
\]
Substitute the known values:
\[
\text{EBT} = \frac{10,300}{1 - 0.23} = \frac{10,300}{0.77} = 13,376.62
\]

### Step 3: Formula for Earnings Before Interest and Tax (EBIT)
Now, we calculate Earnings Before Interest and Tax (EBIT) by adding interest expense to EBT:
\[
\text{EBIT} = \text{EBT} + \text{Interest Expense}
\]
Substitute the values:
\[
\text{EBIT} = 13,376.62 + 2,910 = 16,286.62
\]

### Step 4: Formula for Depreciation Expense
To calculate depreciation, we use the formula for EBIT:
\[
\text{EBIT} = \text{Sales} - \text{Costs} - \text{Depreciation Expense}
\]
Rearranging the equation to solve for Depreciation Expense:
\[
\text{Depreciation Expense} = \text{Sales} - \text{Costs} - \text{EBIT}
\]
Substitute the known values:
\[
\text{Depreciation Expense} = 80,200 - 56,900 - 16,286.62 = 7,013.38
\]

### Final Answer:
The depreciation expense for Troiano Pizza Company is approximately **$7,013.38**.

Would you like further clarification or details? 

Here are 5 related questions to explore:
1. How do tax rates impact depreciation expense calculations?
2. What other methods can be used to estimate depreciation (e.g., straight-line or declining balance)?
3. How does the depreciation expense affect the cash flow of a company?
4. What are retained earnings and how do they contribute to the company's equity?
5. How do dividends affect the company’s net income and financial strategy?

**Tip:** Depreciation is a non-cash expense, meaning it reduces taxable income but does not affect the company’s cash flow directly.

Calculate the depreciation expense for Troiano Pizza Company using financial data, including sales, costs, retained earnings, and tax rate. This problem covers financial accounting concepts and algebraic formulas used to find net income, EBT, EBIT, and depreciation. Suitable for college-level business students.

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