Question

Need answer for number 21. Answer to 20 is d) $540000.

Problem C. Given the following problem, answer questions 20 to 21 A company operates in Ottawa (Ontario) and last year they had a gross revenue of $2,300,000. They paid $1,150,000 for salaries and benefits and spent $550,00 for other business-related expenses. They use an especial piece of equipment with the UCC of $200,000. The CCA rate for this equipment is 30%. 20. What is the taxable income of the company? a) $1,150,000 c) $570,000 b) $600,000 d) $540,000 21. The federal tax rates for corporate income are 10% and 15% for small and active businesses, respectively. The provincial tax rates (Ontario) for corporate income are 3.5% and 11.5% for small and active businesses, respectively. The income limit for small businesses for tax deduction is $500,000. How much is their income tax? a) $72,900 b) $78,100 c) $95,300 d) $143,700

Answer 1

The correct answer is "B" : $78,100

Workings :

Calculation of federal tax :

1. Tax @10% on first 500,000 $ of income = 500,000*10% = 50,000$

2. Tax @15% on next 40,000 $ of income = 40,000*15% = 6,000$

3. Total federal tax = 56,000$

Calculation of provincial tax :

1. Tax @3.5% on first 500,000 $ of income = 500,000*3.5% = 17,500$

2. Tax @11.5% on next 40,000 $ of income = 40,000*11.5% = 4,600$

3. Total federal tax = 22,100$

Therefore total Income Tax = 56,000+22,100 = 78,100 $