1. Calculating Taxes. The Herrera Co. had $246,000 in taxable income. Using the rates from Table 2.3 in the chapter calculate the company's income taxes. What is the average tax rate? What is the marginal tax rate?
The total amount of income tax is 0.15($50,000 = $7,500 + 0.25(($75,000 – 50,000) = $6,250 + 0.34(($100,000 – 75,000) = $8,500 + 0.39(($246,000 – 100,000) = $56,940 Total = $79,190
The average tax rate is the total amount of tax divided by taxable income, so:
Average tax rate = $79,190 / $246,000 = 0.3219 or 32.19%
The marginal tax rate is the tax rate on the next $1 of earnings (taxable income). Since taxable income of $246,000 falls in the 39% tax …show more content…
Accumulated ret. earnings 1,960,000 Total assets $4,513,000 Total liab. & owners’ equity $4,513,000
First find total assets as a sum of all items on the assets side $4,513,000.
Then, total liabilities and owners’ equity must equal total assets $4,513,000.
Total liabilities and owners’ equity is: TL & OE = Total liabilities + Common stock + Accumulated ret. earnings
Common stock = TL & OE – Total liabilities – Accumulated ret. earnings
Common stock = $4,513,000 – 2,160,000 – 1,960,000 = $393,000 (input this number in the balance sheet)
6. Net Income and OCF. During 2010, Raines Umbrella Corp. had sales of $740,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $610,000, $105,000, and $140,000, respectively. In addition, the company had an interest expense of $70,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) Suppose Raines Umbrella Corp. paid out $30,300 in cash dividends. Spending on net fixed assets and net working capital was zero, and no new stock was issued during the year. What was the change in the firm’s long-term debt account?
The change in the firm’s long-term debt account is essentially the