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Important information about Taxable income and tax liability

The Analtoly Corporation is an electronics dealer. Sales for the last year \$ 4.5 million , and costs of goods sold and operating expenses totaled \$ 3.2 million. Analtoly also paid
\$ 150,000 in interest expense, and depreciation expense totaled \$ 50,000. In addition, the company sold securities for \$ 120,000 that it purchased 4 years earlier at a price of
\$ 40,000. Compute the taxable income and tax liability for Analtoly.

Taxable income is basically determined as income less allowable exclusions and tax-deductible expenses
Seventy percent of any dividends received from another corporation are tax exempt
Dividends paid by the corporation to its stockholders are not tax deductible

Corporate rate structure:
15% \$0 - \$50,000
25% \$50,001 - \$75,000
34% \$75,001 - 100,000
There is an added tax of 5% for income between \$100,000 and \$335,000.
There is also an additional added tax of 3% on income between \$15 million and \$18 1/3 million.

Solution Preview

The taxable income is \$1,180,000 and the tax liability is \$401,200

Sales \$ 4,500,000
Cost of Goods Sold and Cash Operating Expenses ...

Solution Summary

The solution explains how to calculate the taxable income and tax liability.

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