Sanderson Inc. sells minicomputers. During the past year the company’s sales wer

Question

Sanderson Inc. sells minicomputers. During the past year the company’s sales were $3.07 million. The cost of its merchandise sold came to $1.87 million, and cash operating expenses were $340,000; depreciation expense was $93,000 and the firm paid $148,000 in interest on its bank loans. Also the corporation paid $28,000 in the form of dividends to its own common stockholders. Calculate the corporations tax liability by using the corporate tax rate structure below.
Corporate Tax Rates: 15% $0-$50,000 25% $50,001-$75,000 34% $75,001-$10,000,000 35% Over $10,000,000
Additional surtax: •5% on income between $100,000 and $335,000 •3% on income between $15,000,000 and $18,333,333
Sanderson Inc. sells minicomputers. During the past year the company’s sales were $3.07 million. The cost of its merchandise sold came to $1.87 million, and cash operating expenses were $340,000; depreciation expense was $93,000 and the firm paid $148,000 in interest on its bank loans. Also the corporation paid $28,000 in the form of dividends to its own common stockholders. Calculate the corporations tax liability by using the corporate tax rate structure below.
Corporate Tax Rates: 15% $0-$50,000 25% $50,001-$75,000 34% $75,001-$10,000,000 35% Over $10,000,000
Additional surtax: •5% on income between $100,000 and $335,000 •3% on income between $15,000,000 and $18,333,333

Corporate Tax Rates: 15% $0-$50,000 25% $50,001-$75,000 34% $75,001-$10,000,000 35% Over $10,000,000
Additional surtax: •5% on income between $100,000 and $335,000 •3% on income between $15,000,000 and $18,333,333

Explanation / Answer

Sales $3,070,000 Cost of merchandise sold $1,870,000 Gross Profit $1,200,000 Cash Operating expenses $340,000 Earning Before Interest,Tax and Depreciation $860,000 Deprecition expense $93,000 Earning before interest and taxes $767,000 Interest expenses $148,000 Income before tax $619,000 A Tax on $50000 $            7,500 (0.15*50000) B Tax on 50001-75000 $            6,250 (0.25*(75000-50000) C Tax on 75001-619000 $        184,960 (0.34*(619000-75000) D=A+B+C Total Tax payable $        198,710 E Surtax $          16,750 (0.05*335000) F=D+E Corporation tax Liability $        215,460

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