Question
Builtrite had sales of $700,000 and COGS of $280,000. In addition, operating expenses were calculated at 25% of sales. Builtrite also received dividends of $50,000
Builtrite had sales of $700,000 and COGS of $280,000. In addition, operating expenses were calculated at 25% of sales. Builtrite also received dividends of $50,000 and paid out common stock dividends of $25,000 to its stockholders. A long-term capital gain of $70,000 was realized during the year along with a capital loss of $50,000.
1. What is Builtrites taxable income?
a. $257,000
b. $242,000
c. $280,000
d. $266,000
2.
Based on their taxable income, what is Builtrites tax liability?
$83,480 | ||
$92,450 | ||
$77,630 | ||
$86,990 |
3.
If we add to our problem that Builtrite also had $10,000 in interest expense, which of the following statements is correct (assuming the same marginal tax rate of 39%)?
Taxable income would increase by $10,000 | ||||||||||||||||||||||||||
Taxable income would decrease by $10,000. | ||||||||||||||||||||||||||
Taxable income would decrease by $6,100. | ||||||||||||||||||||||||||
Taxable income would increase by $6,100 4. If Builtrite had experienced a long-term capital loss of $80,000 (instead of the $50,000 long-term capital loss stated in the problem), and still had the $70,000 long-term capital gain stated in the problem, which of the following is correct:
|
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