Question

The Talley Corporation had taxable operating income of $380,000 (i.e., earnings from operating revenues minus all...

The Talley Corporation had taxable operating income of $380,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $40,000, (2) dividends received of $15,000, and (3) dividends paid of $25,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt. What is the firm’s taxable income? Round your answer to the nearest dollar. $ 380,000 What is the tax expense? Round your answers to the nearest dollar. $ What is the after-tax income? Round your answers to the nearest dollar.

Homework Answers

Answer #1
1] Taxable operating income $ 380,000
Less: Interest charges $           40,000
Add: Taxable portion of dividends = 15000*50% = $             7,500
Taxable income $ 347,500
2] Tax expense = 347500*21% = $           72,975
3] Operating income $ 380,000
Add: Dividend income $           15,000
Less: Interest charges $           40,000
Income before taxes $ 355,000
Tax expense [as calculated at (2) above] $           72,975
After tax income $ 282,025
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