Question

Island Corporation has the following income and expense items for the year:

Gross receipts from sales $60,000
Dividends received from 15%- owned domestic corporation 40,000
Expenses connected with sales 30,000
The taxable income of Island Corporation is?
a)$42.000
b)$47.000
c)$100.000
d)$70,000

Answer 1

The taxable income of Island Corporation is calculated by subtracting expenses from gross receipts and adding dividends, resulting in a taxable income of $70,000.

Step-by-step explanation:

To calculate the taxable income of Island Corporation, we subtract the expenses from gross income and add any other income sources. Firstly, we subtract the expenses connected with sales from the gross receipts from sales:

$60,000 (gross receipts) - $30,000 (expenses) = $30,000.

Next, we add the dividends received from the domestic corporation:

$30,000 + $40,000 (dividends) = $70,000.

Therefore, the taxable income of Island Corporation is $70,000, which corresponds to option d).