The Wendt Corporation had $11 million of taxable income. What is the company\'s

Question

The Wendt Corporation had $11 million of taxable income.

What is the company's federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$   

Assume the firm receives an additional $2.5 million of interest income from some bonds it owns. What is the tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$   

Now assume that Wendt does not receive the interest income but does receive an additional $1.75 million as dividends on some stock it owns. What is the tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$  

Explanation / Answer

What is the company's federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$   
a. Tax = $3,400,000 + ($11,000,000 - $10,000,000)(0.35) = $3750000

Assume the firm receives an additional $2.5 million of interest income from some bonds it owns. What is the tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$   
b. Tax = $2,500,000(0.35) = $875000

Now assume that Wendt does not receive the interest income but does receive an additional $1.75 million as dividends on some stock it owns. What is the tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.

= ($1,750,000)0.30(0.35) = $183750

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