Question

The William B. Waugh Corporation is a regional Toyota dealer. The firm sells new and used trucks and is actively involved in the parts business. During the most recent​ year, the company generated sales of $3.01 million. The combined cost of goods sold and the operating expenses were ​$2.13 million.​ Also, $397,000 in interest expense was paid during the year. Calculate the​ corporation's tax liability by using the corporate tax rate structure in the popup​ window

Corporate Tax Rates
​ 15%	​$0—​$50,000
​ 25%	​$50,001—​$75,000
34%	​$75,001—​$10,000,000
​ 35%	over​ $10,000,000
Additional​ surtax:
•​5% on income between​ $100,000 and​ $335,000
•3% on income between​ $15,000,000 and​ $18,333,333

Answer 1

Sales $3,010,000 $2,130,000 Cost of Goods Sold and Operating Expenses Operating Profit Interest Expense $880,000 $397,000 Taxable Ordinary Income $483,000 Tax Liability $50,000 x 0.15 $7,500 $25,000 x 0.25 $6,250 $408,000 x 0.34 $138,720 $152,470 Surtax $335,000 x 0.05 Total tax due $7,500 $159,970