Question

Required information The following information applies to the questions displayed below. Assume Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 25 percent marginal tax rate. (Do not round intermediate calculation.) b. $5,600 to reimburse the cost of meals incurred by employees while traveling for the business. After-tax cost

Answer 1

solution :

given that

sarah is a cash method calendar year tax payer

given the following cash payments related to her buisiness

b.$5600 to reimburse cost of meals incurred by employees while travelling

c.$6000 for football tickets to entertain out of town clients during contract negotiations

calculation of after tax cost of each payment assuming she has a 25 % marginal tax tax rate

b.

after tax cost = $4900

working :

Only half of the cost of meals is tax deductible.

Therefore after tax cost

= $2800+ $2800 * ( 1 -0.25)

= 2800+2100

=4900

c.

after tax cost = $5250

working :

Only half of the cost of meals is tax deductible.

Therefore after tax cost

= $3000+ $3000 * ( 1 -0.25)

= 3000+2250

=5250