Using the Income Statement from Chapter 1 for ABC Corporation that we have been using all semester:

• We are going to calculate and project the actual "Current Taxes" to be paid (Tab "A" marked with YELLOW HIGHLIGHT), by;
  1. On Tab "B" calculate the estimated depreciation expense under MACRS;
  2. Calculate "Taxable Income"by starting with the given EBT from the Income Statement,backing out (adding back in)the original Straight Line depreciation and then deducting (subtract out)the new calculated MACRS depreciation).
  3. Use your new Taxable Income on Tab "C" to calculate the actual current Income Tax, then;
  4. Carry your Income Tax Expense, calculated on Tab "C" to the "Current Tax" line on the Income Statement, highlighted in yellow.

The MACRS Table and Tax Rate Tables are pre-loaded.

1 A B D ABC Company 2 Income Statement for the Year Ended December 31, 20x2 and 20x1 $ thousand $ thousand (except EPS) (except EPS) 3 20x2 20x1 Total Operating Revenues (or Total Sales Revenue) 2,575.0 2,050.0 5 Less Cost of Goods Sold (COGS) 1,150.0 985.0 6 Gross Profits 1,425.0 1,065.0 7 Less Operating Expenses: 8 Selling Expenses 275.0 250.0 9 General and Administrative Expenses (G&A) 225.0 205.0 10 Depreciation Expense 100.0 95.0 11 Fixed Expenses 75.0 75.0 12 Total Operating Expenses 675.0 625.0 13 Net Operating Income 750.0 440.0 14 Other Income 20.0 15.0 15 Earnings Before Interest and Taxes (EBIT) 770.0 455.0 16 Less Interest Expense: 17 Interest on Short-Term Notes 10.0 10.0 18 Interest on Long-Term Borrowing 50.0 55.0 19 Total Interest Expense 60.0 65.0 20 Pretax Earnings (Earings Before Taxes, EBT) 710.0 390.0 21 Less Taxes: 22 Current Tax 23 Deferred Tax 170.4 93.6 24 Total Tax (Rate = Page C) 170.4 93.6 25 Net Income (Earnings After Taxes, NI, EAT) 539.6 296.4 26 Less: Preferred Stock Dividends 95.0 95.0 27 Net Earnings Available to Common Stockholders 444.6 201.4 28 Earnings per Share (100,000 shares outstanding) $4.45 $2.01 29 Addition to Retained Earnings 333.6 112.4 30 Dividends Paid to Holders of Common Stock 111.0 89.0 31 A B D E F G H $ thousand 20x2 $ thousand 20x1 2,400.0 1,880.0 435.0 140.0 (1,005.0) 2,400.0 1,575.0 390.0 115.0 (910.0) 0.0 (305.0) (45.0) (25.0) 40 15 10 49 39 9 3 100 951 2 3 Fixed Assets (at Cost) 4 Land and Buildings 5 Machinery and Equipment 6 Furniture and Fixtures 7 Vehicles 8 Less Accumulated Depreciation 9 10 11 Additions to Fixed Assets (at Cost), Net 12 Land and Buildings 13 Machinery and Equipment 14 Furniture and Fixtures 15 Vehicles 16 17 Book Depreciation 18 Land and Buildings 19 Machinery and Equipment 20 Furniture and Fixtures 21 Vehicles 22 Total 23 24 25 MACR Depreciation Classes 26 Land and Buildings 27 Machinery and Equipment 28 Furniture and Fixtures 29 Vehicles 30 31 32 MACR Depreciation (first 6 years as required by 33 IRS regulations) 34 35 36 37 38 39 40 41 Total MACRS Depreciation (Per Class) 42 Total MACRS Depreciation 43 44 45 46 47 48 49 Calculation of Taxable income 50 Pretax Earnings (Earings Before Taxes, EBT) 51 Add Back Book Depreciation 52 Less MACRS Depreciation 53 Taxable income (Adjusted for MACRS Depreciation) 54 20 7 10 5 3yr 33% 44.45% 14.97% 7.41% 5yr 20% 32% 19.20% 11.52% 11.52% 5.76% 7yr 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 10yr 10% 18% 14.40% 11.52% 9.22% 7.37% 20yr 3.75% 7.22% 66.77% 6.18% 5.71% 5.29% $ $ $ $ $ 710 100 390 95 A.Figure 1-7 B.Depr and Taxable Income C.Tax Schedule J L M N. o P Tax Bracket Table OLD (Obsolete after 2017) $000s At least Not over Base Marginal 0.00 50.00 0 15% 50.00 75.00 7.50 25% 75.00 100.00 13.75 34% 100.00 335.00 22.25 39% 335.00 10,000.00 113.90 34% 10,000.00 15,000.00 3,400.00 35% 15,000.00 18,333.33 5,150.00 38% 18,333.33 12,116.67 35% Corporate Tax Rate 2018 (and later) Federal Corporate Tax Rate 2017 (and later) NC Tax Rate (Flat) 21% Flat rate due to PL 115-97 Signed into law 22-Dec-2017. 3% Statutory Rate, per NCDOR site 24% Calculation of Current Tax $ thousand $ thousand (except (except EPS) 20x2 EPS) 20x1 24% 24% Estimated Tax Rate Pre-Tax Income (EBT) (Straighline Depr) From P&L Statement as Given 710 390 Taxable income after Adjustment for MACRS 0 0 Tax Calculation, Income Tax Expense 1 A B D ABC Company 2 Income Statement for the Year Ended December 31, 20x2 and 20x1 $ thousand $ thousand (except EPS) (except EPS) 3 20x2 20x1 Total Operating Revenues (or Total Sales Revenue) 2,575.0 2,050.0 5 Less Cost of Goods Sold (COGS) 1,150.0 985.0 6 Gross Profits 1,425.0 1,065.0 7 Less Operating Expenses: 8 Selling Expenses 275.0 250.0 9 General and Administrative Expenses (G&A) 225.0 205.0 10 Depreciation Expense 100.0 95.0 11 Fixed Expenses 75.0 75.0 12 Total Operating Expenses 675.0 625.0 13 Net Operating Income 750.0 440.0 14 Other Income 20.0 15.0 15 Earnings Before Interest and Taxes (EBIT) 770.0 455.0 16 Less Interest Expense: 17 Interest on Short-Term Notes 10.0 10.0 18 Interest on Long-Term Borrowing 50.0 55.0 19 Total Interest Expense 60.0 65.0 20 Pretax Earnings (Earings Before Taxes, EBT) 710.0 390.0 21 Less Taxes: 22 Current Tax 23 Deferred Tax 170.4 93.6 24 Total Tax (Rate = Page C) 170.4 93.6 25 Net Income (Earnings After Taxes, NI, EAT) 539.6 296.4 26 Less: Preferred Stock Dividends 95.0 95.0 27 Net Earnings Available to Common Stockholders 444.6 201.4 28 Earnings per Share (100,000 shares outstanding) $4.45 $2.01 29 Addition to Retained Earnings 333.6 112.4 30 Dividends Paid to Holders of Common Stock 111.0 89.0 31 A B D E F G H $ thousand 20x2 $ thousand 20x1 2,400.0 1,880.0 435.0 140.0 (1,005.0) 2,400.0 1,575.0 390.0 115.0 (910.0) 0.0 (305.0) (45.0) (25.0) 40 15 10 49 39 9 3 100 951 2 3 Fixed Assets (at Cost) 4 Land and Buildings 5 Machinery and Equipment 6 Furniture and Fixtures 7 Vehicles 8 Less Accumulated Depreciation 9 10 11 Additions to Fixed Assets (at Cost), Net 12 Land and Buildings 13 Machinery and Equipment 14 Furniture and Fixtures 15 Vehicles 16 17 Book Depreciation 18 Land and Buildings 19 Machinery and Equipment 20 Furniture and Fixtures 21 Vehicles 22 Total 23 24 25 MACR Depreciation Classes 26 Land and Buildings 27 Machinery and Equipment 28 Furniture and Fixtures 29 Vehicles 30 31 32 MACR Depreciation (first 6 years as required by 33 IRS regulations) 34 35 36 37 38 39 40 41 Total MACRS Depreciation (Per Class) 42 Total MACRS Depreciation 43 44 45 46 47 48 49 Calculation of Taxable income 50 Pretax Earnings (Earings Before Taxes, EBT) 51 Add Back Book Depreciation 52 Less MACRS Depreciation 53 Taxable income (Adjusted for MACRS Depreciation) 54 20 7 10 5 3yr 33% 44.45% 14.97% 7.41% 5yr 20% 32% 19.20% 11.52% 11.52% 5.76% 7yr 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 10yr 10% 18% 14.40% 11.52% 9.22% 7.37% 20yr 3.75% 7.22% 66.77% 6.18% 5.71% 5.29% $ $ $ $ $ 710 100 390 95 A.Figure 1-7 B.Depr and Taxable Income C.Tax Schedule J L M N. o P Tax Bracket Table OLD (Obsolete after 2017) $000s At least Not over Base Marginal 0.00 50.00 0 15% 50.00 75.00 7.50 25% 75.00 100.00 13.75 34% 100.00 335.00 22.25 39% 335.00 10,000.00 113.90 34% 10,000.00 15,000.00 3,400.00 35% 15,000.00 18,333.33 5,150.00 38% 18,333.33 12,116.67 35% Corporate Tax Rate 2018 (and later) Federal Corporate Tax Rate 2017 (and later) NC Tax Rate (Flat) 21% Flat rate due to PL 115-97 Signed into law 22-Dec-2017. 3% Statutory Rate, per NCDOR site 24% Calculation of Current Tax $ thousand $ thousand (except (except EPS) 20x2 EPS) 20x1 24% 24% Estimated Tax Rate Pre-Tax Income (EBT) (Straighline Depr) From P&L Statement as Given 710 390 Taxable income after Adjustment for MACRS 0 0 Tax Calculation, Income Tax Expense