Solution:-
1.
Given information,
Paid amount = $104,000
Comapny G marginal tax rate = 35%
Company J marginal rate = 15%
(a).Compute the after-tax cash from the contract assuming that Company G is the party to the contract and provides the services to the client:-
Cash receipt after tax of company G = Paid amount - marginal tax rate on paid amount
= 104,000 - (104,000 * 35 %)
= $67,600
Cash receipt after tax = $67,600
Cash receipt after tax of company G = $67,600 |
(b) . Compute the after-tax cash from the contract assuming that Company J is the party to the contract and provides the services to the client :-
Cash receipt after tax of company J= Paid amount - marginal tax rate on paid amount
= 104,000 - (104,000 * 15 %)
= $88,400
Cash receipt after tax = $88,400
Cash receipt after tax of company J = $88,400 |
(c). Compute the after-tax cash from the contract assuming that Company J is the party to the contract, but Company G actually provides the services to the client :-
Note:-
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