Last year, your company had sales of $2.4 million. The firm\'s costs of goods so
ID: 2812928 • Letter: L
Question
Last year, your company had sales of $2.4 million. The firm's costs of goods sold amounted to 34% of sales. The firm also paid cash operating expenses of $1,200,000, and had $80,500 in depreciation expense. The firm had $450,000 in 9% coupon bonds outstanding and paid $25,000 in dividends to its common stockholders. Also, the firm received $40,000 in dividend income from its holdings of other common stocks. Compute the corporation's tax liability.
a) $63735
b) $59430
c) $63630
d) $54180
e) $55230
Explanation / Answer
Correct option is e: 55230
Sales= 2400,000
Less: cost of goods sold = 34%*2400000= 816000
Gross profit = 1584,000
Less: operating expenses 1200000
Depreciation = 80500
Interest = 450000*9%= 40500
Net Income = 263,000
Add Dividend income = 40000
Total Income = 303,000
Tax on total Income @ 21% = $55230
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