Question

Question 1

The average tax rate is

Question 6 options:

	the tax rate that is paid on the last dollar of income earned
	always higher than the marginal tax rate
	calculated by dividing the total taxes paid by the taxable income
	none of the above

Question 2

If Cleveland Motors Had an EBIT of $22,560,700, Interest of $7,479,900 and is taxed at an average rate of 32% what is their Net Income? Round to the nearest cent.

Your Answer:

Question 3

Using the information below -- what was Bala Industries’ Cash Flow from Financing for the year ending 6/30/2011? Round to the nearest cent.

Increase in inventories                     $35

Purchased treasury stock                $20

Purchased property & equipment    $18

Net Income                                      $331

Decrease in accrued income taxes $48

Depreciation & amortization           $115

Decrease in accounts payable         $18

Increase in accounts receivable       $29

Increase in Long-term debt             $100

Your Answer:

Question 4

Which of the following is a tax deductible expense for a corporation?

	common stock
	dividends paid
	loan principal paid
	interest paid

Question 5

Delta Ray Brands Corp. just completed their latest fiscal year. The firm had sales of $17,420,300. Depreciation and amortization was $824,700, interest expense for the year was $820,600, and selling general and administrative expenses totaled $1,590,000 for the year, and cost of goods sold was $9,109,400 for the year. Assuming a federal income tax rate of 34%, what was the Delta Ray Brands net income after-tax? Round to the nearest cent.

Your Answer:

Answer

Answer 1

1.
Tax rate paid on last dollar of income earned is the marginal tax rate. It is calculated based on tax rate table.
Average tax rate is on average the percentage of tax paid on income earned. It is calculated as tax paid divided by taxable income.
Thus, correct answer is option (c ).
2.
Calculation of net income
Earnings before interest and tax (EBIT)	$22,560,700.00
Interest expense	-$7,479,900.00
Earnings before tax	$15,080,800.00
Tax @ 32%	-$4,825,856.00	15080800*32%
Net income	$10,254,944.00
3.
Calculation of cash flow from financing activities
Purchased treasury stock	-$20
Increase in long term debt	$100
Net cash flow from financing activities	$80
4.
Common stock, dividend and loan principal repayment are not expenses of company and hence they are not tax deductible.
Interest paid is expense for company and thus tax deductible.
Thus, correct answer is option (d)
5.
Calculation of net income after tax
Sales	$17,420,300
Cost of goods sold	-$9,109,400
Gross profit	$8,310,900
Depreciation and amortization	-$824,700
Selling general and administrative expense	-$1,590,000
Interest expense	-$820,600
Income before taxes	$5,075,600
Taxes @ 34%	-$1,725,704	5075600*34%
Net income after taxes	$3,349,896