Question Help (Corporate income tax) Sales for J. P. Hulett Inc. during the past

Question

Question Help (Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $4.4 million. Gross profits totaled $1.05 million, and operating and depreciation expenses were $502,000 and $352,000, respectively. Dividend income for the year was $11,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window.EEB toComcute the coloratlons tax lablity, wnat are the firm's average and marginal tax rates? The firm's tax liability for the year is s(Round to the nearest dollar.) The firm's average tax rate is[]%. (Round to two decimal places) The firm's marginal tax rate is ?%. (Round to the nearest integer) ryo

Explanation / Answer

Since the company has more than 80% shares from which it is receiving dividend, it will not pay tax on that.

Taxable income = gross profit - operating and depriciation expense

= $1050000 - $502000 - $352000

= $196000

Total Tax paid by the company = 15% of 50000 + 25% of 25000 + 34% of 25000 + 39% of 96000

= 7500 + 6250 + 8500 + 37440

= $59690

Firm's average tax rate = total tax/(total income)

= 59690/(196000)

= 30.45%

Firm's marginal tax rate = 39%

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