Sandersen Inc. sells minicomputers. During the past year, the company's sales were million. The cost of its merchandise sold came to $ million, and cash operating expenses were $; depreciation expense was $, and the firm paid $ in interest on its bank loans. Also, the corporation paid $ in the form of dividends to its own common stockholders. Calculate the corporation's tax liability by using the corporate tax rate structure in the popup window,

Question Completion:

Sandersen Inc, sells minicomputers. During the past year, the company's sales were 3.00 million. The cost of its merchandise sold came to 2.00 million, and cash operating expenses were 400,000; depreciation expense was 100,000, and the firm paid 150,000 in interest on its bank loans. Also, the corporation paid 25,000 in the form of dividends to its own common stockholders.

Calculate the corporation tax liability.

The corporate tax rates are listed here:

15%$0-$50,000

25%$50,001-$75,000

34%$75,001-$10,000,000

35%over $10,000,000

Sandersen Inc.

Computation of the Corporation's Tax Liability:

Taxable profit = $350,000

15%$0-$50,000                    $7,500 ($50,000 * 15%)

25%$50,001-$75,000             6,250 ($25,000 * 25%)

34%$75,001-$10,000,000    93,500 ($275,000 * 34%)

35%over $10,000,000         0

Total Tax Liability =          $107,250

Explanation:

Data and Calculations:

Sales Revenue          $3,000,000

Cost of goods sold     2,000,000

Gross profit               $1,000,000

Operating expenses    400,000

Depreciation expense  100,000

Operating profit        $500,000

Interest expense         150,000

Profit before taxes   $350,000

Income Taxes             107,250

Profit after taxes     $242,750

Dividend                      25,000

Retained Earnings  $217,750

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