Question

Cullumber Company had a 40 percent tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement? Sales revenue $ 1100000 Cost of goods sold 617000 Salaries and wages expense 80400 Depreciation expense 119000 Dividend revenue 89500 Utilities expense 10600 Discontinued operations loss 99100 Interest expense 19200

Answer 1

The income tax expense for Cullumber Company is calculated by applying the 40 percent tax rate to its taxable income, which is deduced by subtracting all allowable expenses from its sales revenue.

Step-by-step explanation:

The question asks about calculating the income tax expense for Cullumber Company that will be reported on its income statement. The company has a fixed 40 percent tax rate. To calculate the income tax expense, we need to determine the company's taxable income. The taxable income is obtained by subtracting all allowable deductions, including the cost of goods sold (COGS), salaries and wages, depreciation, utilities, and interest expenses, from the sales revenue. Dividend revenue is generally considered an addition to income and the discontinued operations loss can be deducted.

Income tax expense is then calculated by applying the 40 percent tax rate to the taxable income. In this particular situation, specific calculations are not provided, as the student is supposed to use the given pre-tax amounts to find the correct taxable income and then apply the tax rate to find the income tax expense.

The effective tax rate and understanding of how income taxes work for corporations is crucial in business education, especially for students in finance or accounting. The mentioned tax policies and effective tax rates provide a general context for how corporate incomes are taxed in practice.

Answer 2

$101,520

Step-by-step explanation:

Income statement will be made as follows:

$

Sales Revenue 1100000

Less: COGS (617000)

Gross Profit 483000

Less: Salaries & Wages (80400)

Less: Depreciation exp. (119000)

Less: Utilities exp. (10600)

Less: Interest expense (19200)

Earning before tax 253800

Less: Tax(40%) (101520)

Hope this helps.

Good luck buddy.