question archive The Talley Corporation had taxable operating income of $465,000 (i
The Talley Corporation had taxable operating income of $465,000 (i
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The Talley Corporation had taxable operating income of $465,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $30,000, (2) dividends received of $15,000, and (3) dividends paid of $25,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt.
What is the firm’s taxable income? Round your answer to the nearest dollar. $
What is the tax expense? Round your answers to the nearest dollar. $
What is the after-tax income? Round your answers to the nearest dollar.
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Taxable income= Operating income- Interest expense + 50% of dividend received
Given,
Operating income= $465,000
Interest expense= $30,000
Dividend income= $15,000
Plugging the inputs,
Taxable income= 465000-30000+15000*50% = $442,500
Tax amount= Taxable income*Tax rate
Given,
Tax rate= 21%
Therefore, tax expense= 442,500*21% = $92,925
After tax income= Taxable income-Tax expense
=442,500-92,925 = $349,575
