Interest versus dividend income During the year just ended, Shering Distributors, Inc., had pretax earnings from operations
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Question:
Interest versus dividend income 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 held 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.
b. Find the tax and the after-tax amount attributable to the interest income from
Zig Manufacturing bonds.
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