Question

Flip's Pizzeria Inc. has the following financial items for the current year: Adjusted Taxable Income before Interest $39,000,000 Business Interest Income $750,000 Interest Expense $16,900,000 Calculate Flip's tax liability for the current year.

Answer 1

Adjusted Taxable Income before Interest	$39,000,000
Add: Business Interest Income	$750,000
Less: Interest Expense	$16,900,000
Taxable income	$22,850,000
Flip's tax liability for the current year @21%	$4,798,500

Answer 2

To calculate Flip's tax liability for the current year, we need to determine the taxable income after considering the interest expense and interest income. Here's the step-by-step calculation:

1. Calculate the taxable income: Taxable Income = Adjusted Taxable Income before Interest - Interest Expense + Business Interest Income

Taxable Income = $39,000,000 - $16,900,000 + $750,000 Taxable Income = $22,850,000

2. Determine the tax liability: The tax liability can be calculated using the applicable corporate tax rate. Let's assume a corporate tax rate of 21% (which is the tax rate in the United States as of my knowledge cutoff date in September 2021).

Tax Liability = Taxable Income * Corporate Tax Rate

Tax Liability = $22,850,000 * 0.21 Tax Liability = $4,789,500

Therefore, Flip's tax liability for the current year is $4,789,500.