Ganesh Industries faces the following tax schedule: Last year the company realiz
ID: 2812371 • Letter: G
Question
Ganesh Industries faces the following tax schedule:
Last year the company realized $20,000,000 in operating income (EBIT). Its annual interest expense is $5,500,000. What was the company’s net income for the year?
$4,809,874
$4,975,000
$1,575,000
$4,610,000
$3,400,000
Taxable Income Tax on Base of Bracket Percentage on Excess above base Up to $50,000 $0 15% $50,000$75,000 7,500 25 $75,000$100,000 13,750 34 $100,000$335,000 22,250 39 $335,000$10,000,000 113,900 34 $10,000,000$15,000,000 3,400,00 35 $15,000,000$18,333,333 5,150,000 38 Over $18,333,333 6,416,667 35Explanation / Answer
A Net Operating Income(EBIT) $20,000,000 B Annual Interest expense $5,500,000 C=A-B Earning before tax(EBT) $14,500,000 J Tax expense $ 4,975,000 K=C-J Net Income for the year $9,525,000 Calculation of Tax: Taxable income $14,500,000 D Tax on first $50,000 $ 7,500 (0.15*50000) E Tax for $50,000-$75000 $ 6,250 0.25*(75000-50000) F Tax for $75,000-$100,000 $ 8,500 (0.34*(100000-75000) G Tax for $100,000-$335,000 $ 91,650 (0.39*(335000-100000) H Tax for $335,000-$10,000,000 $ 3,286,100 (0.34*(10000000-335000) I Tax for $10,000,000-$14,500,000 $1,575,000 (0.35*(14500000-10000000) J=D+E+F+G+H+I Total tax payable $ 4,975,000 TotalTax Payable $ 4,975,000 Note: The question should be "Total tax expense for the year",instead of "Net Income"
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