Question

Streamplay Incorporated is a music streaming service. Subscriptions for the streaming service generated pre-tax income of $235,000 in its first year of operations. After paying taxes, the company distributed the remaining earnings to its sole owner Mira Lee. Assume the current corporate and personal income tax rate is 24%.

Required:
Calculate the total amount of tax paid if Steamplay Incorporated is treated as a corporation.

Answer 1

The total amount of tax paid if Streamplay Incorporated is treated as a corporation is $56,400.

Step-by-step explanation:

To calculate the total amount of tax paid if Streamplay Incorporated is treated as a corporation, we need to determine the taxable income and apply the corporate income tax rate.

The pre-tax income of $235,000 is the taxable income. The tax rate is 24% for corporations.

To calculate the tax amount, we multiply the taxable income by the tax rate:

Tax amount = $235,000 × 0.24 = $56,400

Therefore, Streamplay Incorporated would pay a total of $56,400 in taxes if treated as a corporation.