Q1. For the events described below, select the tax-related term from the following list that best applies:

gross income,

depreciation,

operating expense,

taxable income,

income tax,

net operating profit after taxes.

(a)A corporation reports that it had a negative $1,750,000 net profit on its annual income statement.

(b) An asset with a current book value of $120,000 was utilized on a new processing line to increase sales by $200,000 this year.

(c) A machine has an annual write-off of $21,000.

(d ) The cost to maintain quality assurance equipment during the past year was $75,000.

(e) A supermarket collected $24,000 in lottery ticket sales last year. Based on the winnings paid to individuals holding these tickets, a rebate of $250 was sent to the store manager.

( f ) An asset with a book value of $8000 was retired and sold for $8450.

(g) The cost of goods sold in the past year was $3,680,200.

(h) An over-the-counter software system will generate $420,000 in revenue this quarter.

Solution:

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Q2. For a company that had net operating income of $51.3 million and operating expenses of $23.6 million, what was the

(a) gross income, and

(b) earnings before interest and income taxes?

Solution:

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Q3. Two companies, ABC and XYZ, have the following values on their annual tax returns: Company	ABC	XYZ
Sales revenue, $	1,500,000	820,000
Interest revenue, $	31,000	25,000
Operating expenses, $	754,000	591,000
Depreciation, $ (a) Calculate the exact federal income taxes for the year. (b) Determine the percentage of sales revenue each company will pay in federal income taxes. (c) Estimate the taxes using an effective rate on the entire TI of the marginal percentages in Table 171, that is, 34% for ABC and 39% for XYZ. Determine the percentage errors made relative to the exact taxes in (a).	148,000	18,000

NOTE: please help to answer all three questions, thanks!

TABLE 17-1 U.S. Corporate Income Tax Rate Schedule If Taxable income ($) Is: But Not Over Of the Amount Over Over Tax Is 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 15% 7,500 + 25% 13,750 + 34% 22,250 + 39% 113,900 + 34% 3,400,000 + 35% 5,150,000 + 38% 35% 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 0