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Questions 4-6 are based on the following information. Corporate tax.ABC Corporationreceives $3,500 in dividend income. It...

Questions 4-6 are based on the following information. Corporate tax.ABC Corporationreceives $3,500 in dividend income. It is in the 34% marginal tax bracket, and its average tax rate is 25%.

4. When making a decision, the managers of the firm focus on the _____

.a. average tax rate

b. marginal tax rate

5. If a firm invests in another firm’s stocks, _____ of the dividend income will be taxed.

a. 0%

b. 30%

c. 70%

d. 100%

6. The tax on the dividend income alone is equal to _____

.a. $1,190

b. $875

c. $262.5

d. $357

Questions 7-13 are based on the following information. Corporate tax.You are an accountant in Win & Success Industries, Inc. The firm had $200,000 net sales in 2015; its COGS was $70,000; SG & A and R & D were $30,000; its depreciation charge was 12,000; its interest expense was $8,000; it paid $10,000 as cash dividend. Your boss asks you to tell her the firm’s income tax for this year. Corporate marginal tax rates are $0-50,000: 15%; $50,000-75,000: 25%; $75,000-100,000: 34%; $100,000-335,000: 39%.

7. Should the COGS be subtracted from the revenue tocalculate taxable income?

a. Yes

b.

No 8. Should the SG & A and R&D be subtracted from the revenue to calculate taxable income?

a. Yes

b. No

9. Should the depreciation charge be subtracted from the revenue to calculate taxable income?

a. Yes

b.

No 10. Should the interest expense be subtracted from the revenue to calculate taxable income?

a. Yes

b. No

11. Should the cash dividend payout be subtracted from the revenue to calculate taxable income?

a. Yes

b. No

12. The taxable income is _____.

a. $130,000

b. $100,000

c. $80,000

d. $70,000

13. The firm’s income tax is _____.

a. $10,000

b. $7,500

c. $22,250

d. $15,450

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Homework Answers

Answer #1

Answer 4 . Firm Should Consider Marginal rate  of tax as compare to Avargae tax rate

Answer 5. Dividend income will be tax at 100%

Answer 6. Tax on the more Single Dividned will be 1190

Answer 7 yes for calculate taxable income Cost of Goods sold sholud be subtract

Answer 8 yes  R& D Expenses Should be deducted form revenue to calculate net income

Answer 9.yes for calculate taxable income - Depreication sholud be subtract

Answer 10. yes interest income also deducted for calculate net income

Answer 11. no cash dividend should not be deducted to calculate net income

Answer 12 net taxable income is 80000 i.e C

ANswer 13 firm income tax is

on 80000- tax is 15450 that is D

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