Question

1. In its most recent financial statements, Del-Castillo Inc. reported $70 million of net income and $850 million of retained earnings. The previous retained earnings were $830 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

2.

The Talley Corporation had taxable operating income of $400,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $40,000, (2) dividends received of $15,000, and (3) dividends paid of $25,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt.

What is the firm’s taxable income? Round your answer to the nearest dollar.

$  

What is the tax expense? Round your answers to the nearest dollar.

$  

What is the after-tax income? Round your answers to the nearest dollar.

3.

The Wendt Corporation reported $70 million of taxable income. Its federal tax rate was 21% (ignore any possible state corporate taxes).

1. What is the company's federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

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2. Assume the firm receives an additional $3 million of interest income from some bonds it owns. What is the additional tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

   $  

3. Now assume that Wendt does not receive the interest income but does receive an additional $3 million as dividends on some stock it owns. Recall that 50% of dividends received are tax exempt. What is the additional tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

   $  

Answer 1

Hi, As per the HomeworkLib guidelines, in case of multiple questions, I need to solve the first question.

The dividend is computed as shown below:

= Previous retained earnings + Net income - Ending retained earnings

= $ 830,000,000 + $ 70,000,000 - $ 850,000,000

= $ 50,000,000

Feel free to ask in case of any query relating to this question