Chapter 03: Financial Statements, Cash Flow, and Taxes
d.
$29,520
e.
$24,720
c
b.
c.
d.
e.
CHALLENGING
3-9 Income Taxes
Multiple Choice
FOFM.BRIG.17.03.09 – Income Taxes
United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic
Carry-back, carry-forward
Bloom’s: Analysis
6/23/2015 3:24 PM
8/6/2015 2:00 PM
126. Moose Industries faces the following tax schedule:
Taxable Income
Tax on Base of Bracket
Percentage on Excess above Base
Up to $50,000
$0
15%
$50,000-$75,000
7,500
25
$75,000-$100,000
13,750
34
$100,000-$335,000
22,250
39
$335,000-$10,000,000
113,900
34
$10,000,000-$15,000,000
3,400,000
35
$15,000,000-$18,333,333
5,150,000
38
Over $18,333,333
6,416,667
35
Last year the company realized $11,500,000 in operating income (EBIT). Its annual interest expense is $1,500,000. What
was the company’s net income for the year?
a.
$6,402,000
Chapter 03: Financial Statements, Cash Flow, and Taxes
b.
$6,600,000
c.
$5,214,000
d.
$6,732,000
e.
$7,458,000
b.
c.
d.
e.
CHALLENGING
127. Corporations face the following tax schedule:
Taxable Income
Tax on Base of Bracket
Percentage on Excess above
Base
Chapter 03: Financial Statements, Cash Flow, and Taxes
Up to $50,000
$0
15%
$50,000-$75,000
7,500
25
$75,000-$100,000
13,750
34
$100,000-$335,000
22,250
39
$335,000-$10,000,000
113,900
34
$10,000,000-$15,000,000
3,400,000
35
$15,000,000-$18,333,333
5,150,000
38
Over $18,333,333
6,416,667
35
Company Z has $40,000 of taxable income from its operations, $5,000 of interest income, and $30,000 of dividend
income from preferred stock it holds in other corporations. What is Company Z’s tax liability? Assume a 70% dividend
exclusion for tax on dividends.
a.
$8,840
b.
$6,460
c.
$8,500
d.
$10,030
e.
$7,055
c
b.
c.
d.
e.
CHALLENGING
3-9 Income Taxes
FOFM.BRIG.17.03.09 – Income Taxes
United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic
Chapter 03: Financial Statements, Cash Flow, and Taxes
128. Lintner Beverage Corp. reported the following information from their financial statements:
Operating income (EBIT) =
$10,000,000
Interest payments on long-term debt =
$1,750,000
Dividend income =
$1,000,000
Calculate Lintner’s total tax liability using the corporate tax schedule below:
Taxable Income
Tax on Base of Bracket
Percentage on Excess above Base
$0-$50,000
$0
15%
$50,000-$75,000
7,500
25
$75,000-$100,000
13,750
34
$100,000-$335,000
22,250
39
$335,000-$10,000,000
113,900
34
$10,000,000-$15,000,000
3,400,000
35
$15,000,000-$18,333,333
5,150,000
38
Over $18,333,333
6,416,667
35
Assume a 70% dividend exclusion for tax on dividends.
a.
$2,877,930
b.
$3,604,680
c.
$2,529,090
d.
$2,412,810
e.
$2,907,000
e
Corporate taxes
Bloom’s: Analysis
6/23/2015 3:24 PM
8/6/2015 2:03 PM
Chapter 03: Financial Statements, Cash Flow, and Taxes
b.
c.
d.
e.
CHALLENGING
3-9 Income Taxes
Multiple Choice
FOFM.BRIG.17.03.09 – Income Taxes
United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic
United States – OH – DISC.FOFM.BRIG.17.06 – Finance function
Corporate taxes
Bloom’s: Analysis
6/23/2015 3:24 PM
8/6/2015 2:11 PM
129. Last year, Martyn Company had $260,000 in taxable income from its operations, $50,000 in interest income, and
$100,000 in dividend income. Using the corporate tax rate table given below, what was the company’s tax liability for the
year?
Taxable Income
Tax on Base of Bracket
Percentage on Excess above Base
$0-$50,000
$0
15%
$50,000-$75,000
7,500
25
$75,000-$100,000
13,750
34
$100,000-$335,000
22,250
39
$335,000-$10,000,000
113,900
34
$10,000,000-$15,000,000
3,400,000
35
$15,000,000-$18,333,333
5,150,000
38
Over $18,333,333
6,416,667
35
Assume a 70% dividend exclusion for tax on dividends.
a.
$115,600
b.
$134,096
c.
$139,876
d.
$119,068
e.
$95,948
a
Chapter 03: Financial Statements, Cash Flow, and Taxes
130. Griffey Communications recently realized $102,500 in operating income. The company had interest income of
$25,000 and realized $70,000 in dividend income. The company’s interest expense was $40,000. Using the corporate tax
schedule below, what is Griffey’s tax liability?
Taxable Income
Tax on Base of Bracket
Percentage on Excess above Base
Up to $50,000
$0
15%
$50,000-$75,000
7,500
25
$75,000-$100,000
13,750
34
$100,000-$335,000
22,250
39
$335,000-$10,000,000
113,900
34
$10,000,000-$15,000,000
3,400,000
35
$15,000,000-$18,333,333
5,150,000
38
Over $18,333,333
6,416,667
35
Assume a 70% dividend exclusion for tax on dividends.
a.
$31,445
b.
$23,520
b.
c.
d.
e.
CHALLENGING
3-9 Income Taxes
Multiple Choice
FOFM.BRIG.17.03.09 – Income Taxes
United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic
Corporate taxes
Bloom’s: Analysis
6/23/2015 3:24 PM
8/6/2015 2:12 PM
Chapter 03: Financial Statements, Cash Flow, and Taxes
c.
$25,565
d.
$28,122
e.
$20,452
c
b.
c.
d.
e.
CHALLENGING
Chapter 03: Financial Statements, Cash Flow, and Taxes
131. Maureen Smith is a single individual. She claims one exemption of $4,000 for herself and claims a standard
deduction of $6,300. Her salary for the year was $75,000. What is her taxable income?
a.
$62,000
b.
$64,700
c.
$68,700
d.
$71,000
e.
$75,000
132. Maureen Smith is a single individual. She claims one exemption of $4,000 for herself and claims a standard
deduction of $6,300. Her salary for the year was $75,000. Assume the following tax table is applicable.
Single Individuals
If Your Taxable
Income Is
You Pay This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $9,225
$ 0
10.0%
10.0%
$9,225–$37,450
922.50
15.0
13.8
$37,450–$90,750
5,156.25
25.0
20.4
$90,750–$189,750
18,481.25
28.0
24.3
$189,750–$411,500
46,075.25
33.0
29.0
$411,500–$$413,200
119,401.25
35.0
29.0
Over $413,200
119,996.25
39.6
39.6
What is her marginal tax rate?
a.
10%
b.
15%
c.
25%
d.
28%
e.
33%
c
Chapter 03: Financial Statements, Cash Flow, and Taxes
133. Maureen Smith is a single individual. She claims one exemption of $4,000 for herself and claims a standard
deduction of $6,300. Her salary for the year was $75,000. Assume the following tax table is applicable.
Single Individuals
If Your Taxable
Income Is
You Pay This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $9,225
$ 0
10.0%
10.0%
$9,225–$37,450
922.50
15.0
13.8
$37,450–$90,750
5,156.25
25.0
20.4
$90,750–$189,750
18,481.25
28.0
24.3
$189,750–$411,500
46,075.25
33.0
29.0
$411,500–$$413,200
119,401.25
35.0
29.0
Over $413,200
119,996.25
39.6
39.6
What is her federal tax liability?
a.
$5,156.25
b.
$9,243.75
c.
$11,968.75
d.
$12,968.75
e.
$14,543.75
c
Chapter 03: Financial Statements, Cash Flow, and Taxes
134. Maureen Smith is a single individual. She claims one exemption of $4,000 for herself and claims a standard
deduction of $6,300. Her salary for the year was $75,000. Assume the following tax table is applicable.
Single Individuals
If Your Taxable
Income Is
You Pay This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $9,225
$ 0
10.0%
10.0%
$9,225–$37,450
922.50
15.0
13.8
$37,450–$90,750
5,156.25
25.0
20.4
$90,750–$189,750
18,481.25
28.0
24.3
$189,750–$411,500
46,075.25
33.0
29.0
$411,500–$$413,200
119,401.25
35.0
29.0
Over $413,200
119,996.25
39.6
39.6
What is her average tax rate?
a.
15.00%
b.
16.75%
c.
17.25%
d.
18.50%
e.
19.40%
Chapter 03: Financial Statements, Cash Flow, and Taxes
Note: The next 4 problems should be grouped together. If not, then some of the calculations from prior questions
would need to be shown in solutions.
135. Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, so they
claim a total of 4 exemptions. In addition, they have legitimate itemized deductions totaling $25,750. Their total income
from wages is $237,500. What is the couple’s taxable income?
a.
$195,750
b.
$205,750
c.
$211,750
d.
$221,500
e.
$229,500
a
136. Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, so they
claim a total of 4 exemptions. In addition, they have legitimate itemized deductions totaling $25,750. Their total income
from wages is $237,500. Assume the following tax table is applicable:
Married Couples Filing Joint Returns
If Your Taxable
Income Is
You Pay This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base Rate (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $18,450
$ 0
10.0%
10.0%
$18,450-$74,900
1,845.00
15.0
13.8
$74,900-$151,200
10,312.50
25.0
19.4
$151,200-$230,450
29,387.50
28.0
22.4
$230,450-$411,500
51,577.50
33.0
27.1
$411,500-$464,850
111,324.00
35.0
28.0
Over $464,850
129,996.50
39.6
39.6
Chapter 03: Financial Statements, Cash Flow, and Taxes
What is their marginal tax rate?
a.
10%
b.
15%
c.
25%
d.
28%
e.
33%
137. Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, so they
claim a total of 4 exemptions. In addition, they have legitimate itemized deductions totaling $25,750. Their total income
from wages is $237,500. Assume the following tax table is applicable:
Married Couples Filing Joint Returns
If Your Taxable
Income Is
You Pay This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base Rate (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $18,450
$ 0
10.0%
10.0%
$18,450-$74,900
1,845.00
15.0
13.8
$74,900-$151,200
10,312.50
25.0
19.4
$151,200-$230,450
29,387.50
28.0
22.4
$230,450-$411,500
51,577.50
33.0
27.1
$411,500-$464,850
111,324.00
35.0
28.0
Over $464,850
129,996.50
39.6
39.6
Chapter 03: Financial Statements, Cash Flow, and Taxes
What is their federal tax liability?
a.
$29,387.50
b.
$31,875.25
c.
$35,345.50
d.
$40,525.00
e.
$41,861.50
e
138. Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, so they
claim a total of 4 exemptions. In addition, they have legitimate itemized deductions totaling $25,750. Their total income
from wages is $237,500. Assume the following tax table is applicable:
Married Couples Filing Joint Returns
If Your Taxable
Income Is
You Pay This
Amount on the
Base of the Bracket
Plus This Percentage
on the Excess over the
Base Rate (Marginal Rate)
Average Tax
Rate at
Top of Bracket
Up to $18,450
$ 0
10.0%
10.0%
$18,450-$74,900
1,845.00
15.0
13.8
$74,900-$151,200
10,312.50
25.0
19.4
$151,200-$230,450
29,387.50
28.0
22.4
$230,450-$411,500
51,577.50
33.0
27.1
$411,500-$464,850
111,324.00
35.0
28.0
Over $464,850
129,996.50
39.6
39.6
What is their average tax rate?
a.
21.39%
b.
22.74%
c.
24.38%
d.
25.00%
e.
26.50%
Chapter 03: Financial Statements, Cash Flow, and Taxes