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.

Answer 1

Answer:

tax expense: 34%        103,020 dollars

Explanation:

Sales                         2,400,000

COGS 34% of sales    (816,000)  

Gross profit                1,584,000‬

other operating        (1,200,000)

depreciation                  (80,500)

interest expense

450,000 x 9%                (40,500)

gain on investment        40,000  

Income before taxes    303,000

tax expense: 34%        103,020

The dividends paid are not an expense or revenue for the period. is the distribution of prior period gains.