Question

During 2017, Miami Inc. had sales revenue $1,328,000, gross profit $728,000, operating expenses $398,000, cash dividends $90,000, other expenses and losses $40,000. Its corporate tax rate is 30%. What was Miami's income tax expense for the year

Answer 1

The income tax expense for the year was $ 87,000

Step-by-step explanation:

To calculate the income tax expense we first need to take into account some details of the excercise:

We have a Gross profit of $ 728,000 and a Operating expense of $ 398,000, so $ 728,000- $398,000= $ 330,000 which is the operating income.

We have then other expenses and losses of $ 40,000, so $ 330,000 of the operating income - the $ 40,000 of the other expenses= $ 290,000 which is the income before tax

Finally the, to calculate the income tax expense we have to multiply $ 290,000 of income before tax × the corporate tax rate of 30%.

so $ 290,000×30%= $ 87,000.