Question

1.Montgomery Enterprises Inc.'s final operating profit for the year was $ 280,000. The company sold shares of other companies it held during the year for $ 180,000, up $ 30,000 from $ 150,000 it bought a year ago.

a. What will be the gains made during the year? b.How much taxable income did the company earn during the year?

c.Calculate the total amount of tax to be paid by the company using the data of the corporate tax rate table in Table 2.1.d.Calculate the average and marginal tax rates based on your own calculations.

Answer 1

Tax rate not available. Therefore, Que. (d) could not b e attempted properly.

	Operating Profit	$ 2,80,000
	Capital gain from share of sale	$     30,000	=180000-150000
	TOTAL	$ 3,10,000
Ans A.	Gains made during the year	$ 3,10,000	includes Operating profit and Capital gains
Ans B.	Taxable income	$ 3,10,000	includes Operating profit and Capital gains
Ans C.	Tax	$ 1,24,000	Tax rate not mentioned in question. Assumed @ 40%. Tax charged on profit including Operating profit and Capital gains