Question

Calculate the taxable income, using the appropriate data below. Sales $900,000 Direct Labor $200,000 Direct Materials...

Calculate the taxable income, using the appropriate data below.

Sales $900,000
Direct Labor $200,000
Direct Materials $140,000
Accounts Receivable $275,000
Retained Earnings $90,000
Interest Income $15,000
Depreciation $200,000
Manufacturing Overhead $80,000

Homework Answers

Answer #1

Ans- Computation of Taxable Income

Taxable Income
Particulars Amounts ($)
Sales 900,000
Less- Direct labour (200,000)
Direct material (140,000)
Depreciation (200,000)
Manufacturing overhead (80,000)
  Profit = (A) 280,000
Add- Interest income   (B) 15,000
  Total= (A+B)    295,000
   Taxable income= 295,000

Treatment of some items-

  1. Accounts receivable- actually this is called debtor which is receivable at some future date, so it is not treated as income unless it is received.
  2. Retained earnings- it is profit which is reserved from some past years profit for business expansions, it is already taxed in past so it is being ignored.
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