Builtrite had sales of $36,000,000 in 2011. Cost of goods sold were calculated a

Question

Builtrite had sales of $36,000,000 in 2011. Cost of goods sold were calculated at 65% of sales. Builtrite’s operating expenses were $6,000,000 which included depreciation expense. Bonds with a total par value of $12,000,000 were outstanding and had a 9% coupon rate. Builtrite received $200,000 in dividends from stock owned and paid out $600,000 in dividends to its preferred stockholders. Builtrite sold stock that it had purchased in 2008 and realized a $350,000 capital gain.

a) Calculate Builtrite’s taxable income and tax liability.

b) If Builtrite had also sold another stock that resulted in a $400,000 capital loss, calculate Builtrite’s taxable income.

Explanation / Answer

Answer a BUILTRITE TOTAL INCOME CALCULATION Particulars In $ Sales         3,60,00,000 Less : Cost of goods sold         2,34,00,000 Gross Profit         1,26,00,000 Less : Operating exp.(including Depreciation)            60,00,000 Less : Interest on Bond exp.(12000000 * 9%)            10,80,000 Buiness Income            55,20,000 Capital Gain from sale of stock               3,50,000 Other Income - Dividend from stock owned               2,00,000 Taxable Income            60,70,000 Answer b BUILTRITE TOTAL INCOME CALCULATION Particulars In $ Sales         3,60,00,000 Less : Cost of goods sold         2,34,00,000 Gross Profit         1,26,00,000 Less : Operating exp.(including Depreciation)            60,00,000 Less : Interest on Bond exp.(12000000 * 9%)            10,80,000 Buiness Income            55,20,000 Capital Gain from sale of stock               3,50,000 Less : Capital Loss on sale of stock               4,00,000 Net Capital Loss c/f                 -50,000 Other Income - Dividend from stock owned               2,00,000 Taxable Income            57,20,000

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