Question

Sandersen Inc. sells minicomputers. During the past year the​ company's sales were ​$3.4 million. The cost of its merchandise sold came to ​$1.9 ​million, and cash operating expenses were ​$391,000​; depreciation expense was ​$110,000​, and the firm paid ​$152,000 in interest on its bank loans.​ Also, the corporation received ​$45,000 in dividend income but paid ​$21,000 in the form of dividends to its own common stockholders. Calculate the gross profit, operating profit, taxable dividend income, taxable ordinary income, tota tax due.

Use the following information:

15%=​$0-​$50,000

25%=$50,001-$75,000

34%=​$75,001-$10,000,000

35% over​ $10,000,000

Additional​ surtax:

5% on income between​ $100,000 and​ $335,000

3% on income between​ $15,000,000 and​ $18,333,333

Answer 1

Solution:

.Statement showing calculation of gross profit, operating profit and taxable ordinary income:

	Amount
Sales	$3400,000
less:Cost of goods sold	$1900,000
Gross Profit	$1500,000
Less:Operating expense	$391,000
Less:Depreciation	$110,000​
Operating Income	$999,000
Less:Interest Expense	$152,000
Taxable ordinary income	$847,000

b)Taxable Dividend Income is 30% of dividend received,thus taxable dividend income is;

=$45,000*30%=$13,500

c)Calculation of total tax due:

Total Taxable inome=$847,000+$13,500

=$860,500

Tax on first $50,000 @15%=$7500

Tax on next $25,000@25%=$6250

Tax on balance $7855,000($$860,500-$75,000) @34%=$267,070

Total Tax=$7500+$6250+$267,070=$280,820

Add:Surtax @5% on $235,000=$11,750

Total Tax due=$280,820+$11750=$292,570