In tax year 1, an electronics-packaging firm had a gross income of $30,000,000,
ID: 3122879 • Letter: I
Question
In tax year 1, an electronics-packaging firm had a gross income of $30,000,000, $4,000,000 in salaries, $5,000,000 in wages, $1,000,000 in depreciation expenses, a loan principal payment of $350,000, and a loan interest payment of $300,000. Determine the net income of the company in tax year 1.
The net income of the company in tax year 1 is %
Taxable income (X) Tax Rate Tax Computation Formula $0-$50,000 $0 +0.15X 15% 50,001-75,000 7,500 +0.25 (X -$50,000) 25% 75,001-100,000 34% 13,750 +0.34X-75,000) 100,001-335,000 34% 5% 00.000 335,001-10,000,000 34% 113,900 0.34 (X-335,000) 10,000,001-15,000,000 35% 3,400,000 +0.35 (X-10,000,000) 15,000,001-18,333,333 35% 3% 5,150,000 0.38(X-15,000,000) 18,333,334 and up 35% 6,416,666 +0.35 18,333,333)Explanation / Answer
Taxable Income = Gross Income - Expenses
Gross Income = $30,000,000
Expenses = 4,000,000 in salaries, $5,000,000 in wages, $1,000,000 in depreciation expenses, a loan principal payment of $350,000, and a loan interest payment of $300,000
Expenses = $4,000,000 + $5,000,000 + $1,000,000 + $350,000 + $300,000
Expenses = $10,650,000
Taxable Income = $30,000,000 - $10,650,000 = $19,350,000
Tax slab for Taxable income is :
10,000,000 - 15,000,000 35% 3,400,000 + 0.35(X-10,000,000)
Tax = 3,400,000 + 0.35(19,350,000 - 10,000,000) = 3,400,000 + 0.35 ( 9,350,000)
Tax = 3,400,000 + 3,272,500= $6,672,500
Net Income = Taxable Income - Tax = $19,350,000 - $6,672,500
Net Income = $12,677,500
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