Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted

Question

Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $4.1 million. Gross profits totaled $1.04 million, and operating and depreciation expenses were $493,000 and $341,000, respectively. Dividend income for the year was $14,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, EEB, to Comcute the corporation's tax liability. What are the firm's average and marginal tax ratesf? The firm's tax liability for the year is $63,590. (Round to the nearest dollar.) The fim's average tax rate is%. (Round to two decimal places)

Explanation / Answer

Taxable Income = Gross Profit- Operating and depreciation expenses

= 1040000 - 493000-341000

= 206000

Tax Liability = 50000*0.15+25000*0.25+25000*0.34+106000*0.39

= 63590   

Dividend is excluded as the company has >80% share in the payer.

Average Tax Rate = Tax Payable/ Taxable Income

=63590/ 206000

= 30.87%

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