Corporations earn most of their income from operations; however, they may also receive interest and dividend income. Interest income is taxed as ordinary income; however, dividend income is taxed more favorably. 70% of dividends received is excluded from taxable income, while the remaining 30% is taxed at the ordinary tax rate. For businesses, interest payments are regarded as an expense so they are tax deductible; however, dividend financing. Depreciation expense is tax deductible, so the larger the depreciation, the lower the taxable income, the lower the taxes, and the higher the firm's operating cash flow. The projected 2013 tax rate schedule for corporations is shown below. payments are not tax deductible. Consequently, our tax system encourages debe financing over equity If a Corporation's Taxable Income Is Up to $50,000 $50,000-$75,000 $75,000-$100,000 $100,000-$335,000 $335,000-$10,000,000 $10,000,000-$15,000,000 $15,000,000-$18,333,333 Over $18,333,333 2013 Corporate Tax Rates It Pays This Plus This Percentage Amount on the on the Excess over the Base of the Bracket Base (Marginal Rate) 15.0% 25.0 34.0 39.0 34.0 50 7,500 13,750 22,250 113,900 3,400,000 5,150,000 6,416,667 35.0 38.0 35.0 Average Tax Rate at Top of Bracket 15.0% 18.3 22.3 34.0 34.0 34.3 35.0 35.0 Quantitative Problem: Andrews Corporation has income from operations of $235,000. In addition, it received interest income of $23,500 and received dividend income of $30,500 from another corporation. Finally, it paid $12,900 of interest income to its bondholders and paid $47,700 of dividends to its common stockholders. Using the 2013 corporate tax schedule, what is the firm's federal income tax? Round your intermediated and final answers to the nearest cent $
Corporations earn most of their income from operations; however, they may also receive interest and dividend income. Interest income is taxed as ordinary income; however, dividend income is taxed more favorably. 70% of dividends received is excluded from taxable income, while the remaining 30% is taxed at the ordinary tax rate. For businesses, interest payments are regarded as an expense so they are tax deductible; however, dividend financing. Depreciation expense is tax deductible, so the larger the depreciation, the lower the taxable income, the lower the taxes, and the higher the firm's operating cash flow. The projected 2013 tax rate schedule for corporations is shown below. payments are not tax deductible. Consequently, our tax system encourages debe financing over equity If a Corporation's Taxable Income Is Up to $50,000 $50,000-$75,000 $75,000-$100,000 $100,000-$335,000 $335,000-$10,000,000 $10,000,000-$15,000,000 $15,000,000-$18,333,333 Over $18,333,333 2013 Corporate Tax Rates It Pays This Plus This Percentage Amount on the on the Excess over the Base of the Bracket Base (Marginal Rate) 15.0% 25.0 34.0 39.0 34.0 50 7,500 13,750 22,250 113,900 3,400,000 5,150,000 6,416,667 35.0 38.0 35.0 Average Tax Rate at Top of Bracket 15.0% 18.3 22.3 34.0 34.0 34.3 35.0 35.0 Quantitative Problem: Andrews Corporation has income from operations of $235,000. In addition, it received interest income of $23,500 and received dividend income of $30,500 from another corporation. Finally, it paid $12,900 of interest income to its bondholders and paid $47,700 of dividends to its common stockholders. Using the 2013 corporate tax schedule, what is the firm's federal income tax? Round your intermediated and final answers to the nearest cent $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Corporate
Corporations earn most of their income from operations; however, they may also receive interest and dividend income. Interest income is taxed as ordinary income; however, dividend✔✔✔ income is taxed more favorably. 70% of dividends ✔received is excluded from taxable income, while the remaining 30% is taxed at
the ordinary tax rate. For businesses, interest ✔✔✔ payments are regarded as an expense so they are tax deductible; however, dividend payments are not tax deductible. Consequently, our tax system encourages debt ✔✔✔ financing over equity v financing. Depreciation expense is tax deductible, so the larger the
depreciation, the lower
the taxable income, the lower ✔✔✔ the taxes, and the higher ✔the firm's operating cash flow. The projected 2013 tax rate schedule for corporations is shown below.
If a Corporation's
Taxable Income Is
Up to $50,000
$50,000 - $75,000
$75,000 - $100,000
$100,000 $335,000
$335,000 $10,000,000
$10,000,000 - $15,000,000
$15,000,000 - $18,333,333
Over $18,333,333
2013 Corporate Tax Rates
Plus This Percentage
Amount on the on the Excess over the
Base of the Bracket Base (Marginal Rate)
$0
15.0%
7,500
25.0
111
13,750
34.0
22,250
39.0
113,900
34.0
3,400,000
35.0
38.0
35.0
It Pays This
5,150,000
6,416,667
Average Tax
Rate at
Top of Bracket
15.0%
18.3
22.3
34.0
34.0
34.3
35.0
35.0
Quantitative Problem: Andrews Corporation has income from operations of $235,000. In addition, it received interest income of $23,500 and received dividend income of $30,500 from another corporation. Finally, it paid $12,900 of interest income to its bondholders and paid $47,700 of dividends to its common stockholders. Using the
2013 corporate tax schedule, what is the firm's federal income tax? Round your intermediated and final answers to the nearest cent.
$
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