Calculating retained profit after interest and dividends Steps:

• Identify operating profit: $20,000.
• Calculate bank loan interest: 10% × $100,000 =$10,000.
• Calculate debenture interest: 5% × $1,000 × (6/12) =$25 (negligible, often rounded in).
• Subtract total costs and dividend from operating profit: $20,000 -$10,000 - $2,000 =$8,000. Why B is correct:
• Retained profit equals operating profit minus finance costs (interest) and dividends, representing distributable earnings after obligations. Why the others are wrong:
• A: Subtracts extra costs like full debenture interest without rounding.
• C: Omits dividend subtraction, yielding ~$10,000 before distribution.
• D: Ignores bank loan interest entirely, leaving ~$11,000 undeducted.

Final answer: B