Question

The William B. Waugh Corporation is a regional Toyota dealer. The firm sells new and used trucks and is actively involved in the parts business. During the most recent​ year, the company generated sales of $3.05 million. The combined cost of goods sold and the operating expenses were ​$2.08 million.​ Also,$401,000 in interest expense was paid during the year. Calculate the​ corporation's tax liability by using the corporate tax rate structure in the popup​ window

Corporate Tax Rates
​ 15%	​$0long dash—​$50,000
​ 25%	​$50,001long dash—​$75,000
​ 34%	​$75,001long dash—​$10,000,000
​ 35%	over​ $10,000,000
Additional​ surtax:
bullet• ​5% on income between​ $100,000 and​ $335,000
bullet• ​3% on income between​ $15,000,000 and​ $18,333,333

Answer 1

The corporation's tax liability is = $193460.00

Calculation:

Sales (A)	$3,050,000.00
Cost of goods sold and peating expenses (B)	$2,080,000.00
Operating profit (C=A-B)	$1,060,000.00
Interest expense (D)	$401,000.00
Taxable ordinary income (C-D)	$569,000.00
Tax liability
=50000*0.15	$7,500.00
=25000*0.25	$6,250.00
=494000*0.34	$167960.00	494000=569000-50000-25000
Tax liabililty	$181710.00
Surtax
=5%* (335000-100000)	$11,750.00
Total tax liability	$193460.00	=181710+11750