The following account balances were drawn from the financial records of Kent Company (KC) as of January 1, 2018: 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 2018 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 2018, determine the amount of interest and dividends paid.

b. Assuming KC earns a before interest expense recognition profit of $900 during 2018, determine the amount of interest and dividends paid.

c. Assuming KC earns a before interest expense recognition profit of $300 during 2018, determine the amount of interest and dividends paid.