Question

Computing Income Taxes

The William B. Waugh Corporation is a regional Toyota dealer. The firm sells new and used trucks and is actively involved in the parts business. During the most recent​ year, the company generated sales of 3.13 million . The combined cost of goods sold and the operating expenses were $2.08 million . Also, 377,000

in interest expense was paid during the year. Calculate the​corporation's tax liability by using the corporate tax rate structure in the popup​ window,

Corporate Tax Rates

​ 15%

​$0long dash—​$50,000

​ 25%

​$50,001long dash—​$75,000

​ 34%

​$75,001long dash—​$10,000,000

​ 35%

over​ $10,000,000

  Additional​ surtax:

   ​5% on income between​ $100,000 and​$335,000
​3% on income between​ $15,000,000 and​ $18,333,333
.

The​ corporation's tax liability is .....?

Answer 1

The​ corporation's tax liability is $ 228,820.

Step-by-step explanation:

To calculate tax liability we first have to find net profit. Detail calculation is given below.

Net profit Calculation

Sales $ 3,130,000

cost of goods sold and the operating expenses ($ 2,080,000)

Interest expense ( $ 377,000)

Net profit $ 673,000

Tax liability Calculation

Income fall under Tax bracket of 34% ($75,001 to ​$10,000,0000 for corporate tax. No additional surtax will be charged as income do not fall under its net.

Tax liabilty = 673,000 * 34% = $ 228,820

​