Question

(Computing income taxes) 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 $3.19 million. The combined cost of goods sold and the operating expenses were $2.03 million. Also, $425,000 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, E: The corporation's tax liability is $ . (Round to the nearest dollar.) i Data Table 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 (Click on the icon located on the top-right corner of the data table above in order to copy its contents into a spreadsheet.)

Answer 1

Taxable Income

Sales Revenue	A	3,190,000
Cost of Goods Sold	B	2,030,000
Interest Expense	C	425,000
Taxable Income	A - B - C	735,000

Tax Computation

Bracket	Rate	Additional Rate	Taxable (Y / N)	Taxable Income Split		Tax
(i)	(ii)	(iii)	(iv)	(v)	Formula	(vi) = (v) x [ (ii) + (iii) ]
$0 - $50,000	15%	0%	Y	50,000	Up to $50,000	7,500
$50,001 - $75,000	25%	0%	Y	25,000	$75,000 - $50,000	6,250
$75,001 - $100,000	34%	0%	Y	25,000	$100,000 - $75000	8,500
$100,001 - $335,000	34%	5%	Y	2,5,000	$335,000 - $100,000	91,650
$335,001 - $10,000,000	34%	0%	Y	400,000	$735,000 - $100,000	136,000
$10,000,001 - $15,000,000	35%	0%	N	-	N/A	-
$15,000,001 - $18,333,333	35%	3%	N	-	N/A	-
over $18,333,334	35%	0%	N	-	N/A	-
				735,000		249,900