Exercise 19-26 (Algorithmic) (LO. 4, 10)Rover Corporation would like to transfer excess cash to its sole shareholder, Aleshia, who is also an employee. Aleshia is in the 24% taxbracket, and Rover is subject to a 21% rate. Because Aleshia's contribution to the business is substantial, Rover believes that a $94,800bonus in the current year is reasonable compensation and should be deductible by the corporation. However, Rover is considering payingAleshia a $94,800 dividend because the tax rate on dividends is lower than the tax rate on compensation.Answer the following questions to determine whether Rover is correct in believing that a dividend is the better choice.a. Regarding taxes, which would benefit Aleshia the most?The $94,800 dividendfrom the bonus.because after taxes she would have $80,580from the dividend and72,048b. Regarding taxes, which would benefit Rover Corporation the most?The $25,000 bonusbecause it would save Rover5,250in taxes.c. Considering the two parties together, which alternative would provide the most overall tax savings?The $94,800 bonusbecause when the overall effect to both the corporation and the shareholder are considered the net taxsavings is $

a. Regarding taxes, Aleshia would benefit more from receiving the $94,800 dividend compared to the…

Answered: Exercise 19-26 (Algorithmic) (LO. 4,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

9. ABC Co. provides an incentive compensation plan under which its president receives a bonus equal to 10% of the corporation’s income before income tax but after deduction of the bonus. If the tax rate is 40% and net income after bonus and income tax was P360,000, what was the amount of the bonus? a. P66,000 b. P90,000 c. P36,000 d. P60,000
! Required information [The following information applies to the questions displayed below.] Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Building Land Total FMV $ 75,000 175,000 $ 250,000 Adjusted Tax Basis $ 20,000 80,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. Gain or loss realized Gain or loss recognized a. What amount of gain or loss does Ron realize on the formation of the corporation? What amount, if any, does he recognize?
Problem 13-14 (Algorithmic) (L0. 1, 3) Chang Corporation is a calendar year taxpayer. At the beginning of the current year, Chang holds accumulated E & P of $50,000. The corporation incurs a deficit in current E & P of $70,000 that accrues ratably throughout the year. On June 30, Chang distributes $30,000 to its sole shareholder, Libby. If Libby's stock has a basis of $5,000, how is she taxed on the distribution? Taxable dividend income in the amount of $ Return of capital in the amount of $ Capital gains in the amount of
Required information Problem 15-46 (LO 15-3) (Algo) [The following information applies to the questions displayed below.] Mason (single) is a 50 percent shareholder in Angels Corporation (an S Corporation). Mason receives a $186,500 salary working full time for Angels Corporation. Angels Corporation reported $426,000 of taxable business income for the year (2022). Before considering his business Income allocation from Angels and the self-employment tax deduction (if any). Mason's adjusted gross income is $186,500 (all salary from Angels Corporation). Mason claims $63,000 in itemized deductions. Answer the following questions for Mason. Note: Leave no answer blank. Enter zero if applicable. Problem 15-46 Part b (Algo) b. Assuming the business income allocated to Mason is income from a specified service trade or business, what is Mason's deduction for qualified business income? Ignore the wage-based limitation when computing the deduction. Deduction for qualified business incomo Show…
Problem 13-14 (Algorithmic) (LO. 1, 3) Sparrow Corporation is a calendar year taxpayer. At the beginning of the current year, Sparrow holds accumulated E & P of $213,800. The corporation incurs a deficit in current E & P of $299,320 that accrues ratably throughout the year. On June 30, Sparrow distributes $128,280 to its sole shareholder, Libby. If Libby's stock has a basis of $21,380, how is she taxed on the distribution? Taxable dividend income in the amount of $ Return of capital in the amount of $ Capital gains in the amount of $
am. 120.
Bulldog Corporation reported taxable income of $510,000 this year, before any deduction for any payment to its sole shareholder and employee, Georgia Brown. Bulldog chose to pay a bonus of $146,000 to Georgia at year-end. The bonus meets the requirements to be "reasonable" and is therefore deductible by Bulldog. Georgia is subject to a marginal tax rate of 35 percent on the bonus. What is the income tax imposed on the corporate income earned by Bulldog and the income tax on the bonus paid to Georgia? Corporate tax Shareholder tax Total income tax
Able Company provides an incentive compensation plan under which its president received a bonus equal to 10% of the corporation’s income before income tax but after deduction of the bonus. If the tax rate is 35% and net income after bonus and income tax was P2,600,000, what was the amount of the bonus? A 260,000 B 200,000 C 400,000 D 440,000
Problem 8-42 (LO 8-4) Dominique and Terrell are joint owners of a bookstore. The business operates as an S corporation. Dominique owns 65%, and Terrell owns 35%. The business has the following results in the current year: Revenue Business expenses Charitable contributions Short-term capital losses Long-term capital gains Required: How do Dominique and Terrell report these items for tax purposes? venues Expenses Ordinary income Charitable contributions $ 1,500,000 825,000 37,500 3,000 5,000 S/T capital losses LIT capital gains X Answer is complete but not entirely correct. Dominique (65%) Terrell (35%) Total $1,500,000 825,000✔ 675,000 37,500✔ (3,000) 5,000 $ 536,250 $ 288,750 24,375 13,125 (1,950)✔ (1,050) 3,250 1,750 333* Reporting Schedule To Schedule E To Schedule A To Schedule D To Schedule D >>>>
Rover Corporation would like to transfer excess cash to its sole shareholder, Aleshia, who is also an employee. Aleshia is in the 24% tax bracket, and Rover is subject to a 21% rate. Because Aleshia's contribution to the business is substantial, Rover believes that a $49,200 bonus in the current year is reasonable compensation and should be deductible by the corporation. However, Rover is considering paying Aleshia a $49,200 dividend because the tax rate on dividends is lower than the tax rate on compensation. Answer the following questions to determine whether Rover is correct in believing that a dividend is the better choice. a. Regarding taxes, which would benefit Aleshia the most? The $49,200 dividend bonus. because after taxes she would have: b. Regarding taxes, which would benefit Rover Corporation the most? The $25,000 because it would save Rover $ from the dividend and in taxes. c. Considering the two parties together, which alternative would provide the most overall tax…
Please provide correct solution
KA

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS