During the year just ended, Shering Distributors, Inc., had pretax earnings from operations of $490,000. In addition, during the year it received $20,000 in income from interest on bonds it help in Zig Manufacturing and received $20,000 in income from dividends on its 5% common stock holding in Tank Industries, Inc. Shering is in the 40% tax bracket and is eligible for a 70% dividend exclusion on its Tank Industries stock.

A. Calculate the firm's tax on its operating earnings only.

B. Find the tax and after-tax amount attributable to dividend and interest income.

				b. Interest			c. Dividend
Before-tax income				$0			$0
Less exclusion				0			$0				Use the exclusion				70%
Taxable income				$0			$0
Tax		40%		$0			$0
After-tax amount				$0			$0

C. Compare, contrast and discuss the after-tax amounts resulting from the interest income and dividend income calculated in parts b. and c.

D. What is the firm's total tax liability for the year?

Taxes on operating earnings (from part a.)								$196
Taxes on interest income (from part b.)								$0
Taxes on dividend income (from part c.)								$0
Total tax liability								$196