EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 2.A, Problem 2P
Summary Introduction
To determine: The tax bill of company S.
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Goose Industries faces the following tax schedule. Last year the company realized $15,000,000 in operating income (EBIT). Its annual interest expense is $7,500,000.
(1) Compute the company’s income taxes payable? Use the tax rate table below.
(2) What was the company’s net income for the year?
If a corporation's
taxable income is
It pays this
amount on the
base of the bracket
Plus this percentage
on the excess over the
base (marginal rate)
Average tax
rate at top
of bracket
Up to $50,000
$0
15%
15.0%
$50,000 – $75,000
$7,500
25%
18.3%
$75,000 – $100,000
$13,750
34%
22.3%
$100,000 – $335,000
$22,250
39%
34.0%
$335,000 – $10,000,000
$113,900
34%
34.0%
$10,000,000 – $15,000,000
$3,400,000
35%
34.3%
$15,000,000 – $18,333,333
$5,150,000
38%
35.0%
Over $18,333,333
$6,416,667
35%
35.0%
(1) $2,436,000 (2) $4,950,000
(1) $2,550,000 (2) $4,950,000
(1) $2,550,000 (2)…
Last year, Martyn Company had $500,000 in taxable income from its operations, $50,000 in interest income, and $100,000 in dividend income. Using the corporate tax rate table given below, what was the company's tax liability for the year?
The Wendt Corporation reported $45 million of taxable income. Its federal tax rate was 21% (ignore any possible state corporate taxes).
What is the company's federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
$
Assume the firm receives an additional $1 million of interest income from some bonds it owns. What is the additional tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
$
Now assume that Wendt does not receive the interest income but does receive an additional $1 million as dividends on some stock it owns. Recall that 50% of dividends received are tax exempt. What is the additional tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your…
Chapter 2 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 2.A - Prob. 1QTDCh. 2.A - Prob. 2QTDCh. 2.A - Prob. 3QTDCh. 2.A - Prob. 1PCh. 2.A - Prob. 2PCh. 2.A - Prob. 3PCh. 2.A - Prob. 4PCh. 2.A - Prob. 5PCh. 2.A - Prob. 6PCh. 2.A - Prob. 7P
Ch. 2.A - Prob. 8PCh. 2 - Prob. 1QTDCh. 2 - Prob. 2QTDCh. 2 - Prob. 3QTDCh. 2 - Prob. 4QTDCh. 2 - Prob. 5QTDCh. 2 - Prob. 6QTDCh. 2 - Prob. 7QTDCh. 2 - Prob. 8QTDCh. 2 - Prob. 9QTDCh. 2 - Prob. 10QTDCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13P
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- Grevilla Corporation is a manufacturing company. The corporation has accumulated earnings of $950,000, and it can establish reasonable needs for $400,000 of that amount. Calculate the amount of the accumulated earnings tax (if any) that Grevilla Corporation is subject to for this year. $_____________arrow_forwardIn the current year, Madison Corporation had 50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a Warranty liability for financial reporting purposes of 5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes. Prepare the journal entry to record Madisons income taxes at the end of the year.arrow_forwardPecorino Company had pretax financial income of P2,500,000 in the current year. The entity made corporate estimated tax payment in the amount of 180,000 during the current year. To compute the provision for income tax, the following information was provided: Interest income received 360,000 Tax depreciation in excess of financial statement amount 160,000 Rent received in advance 280,000 Corporate tax rate 30% What amount of income tax payable should be reported?a. 498,000b. 606,000c. 330,000d. 570,000arrow_forward
- Pecorino Company had pretax financial income of P2,500,000 in the current year. The entity made corporate estimated tax payment in the amount of 180,000 during the current year. To compute the provision for income tax, the following information was provided: Interest income received 360,000 Tax depreciation in excess of financial statement amount 160,000 Rent received in advance 280,000 Corporate tax rate 30% What amount of permanent difference between book income and taxable income existed at year-end?arrow_forwardPecorino Company had pretax financial income of P2,500,000 in the current year. The entity made corporate estimated tax payment in the amount of 180,000 during the current year. To compute the provision for income tax, the following information was provided: Interest income received 360,000 Tax depreciation in excess of financial statement amount 160,000 Rent received in advance 280,000 Corporate tax rate 30% 2. What amount of current tax expense should be reported? a. 786,000b. 510,000c. 750,000d. 678,000arrow_forward
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