Answered: Zach Ltd. produced the following data…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Zach Ltd. produced the following data for the year 2015 –
o Interest Income $4,650,000
o Capital Gain realized $50,000
o Dividend Income from company’s 25% ownership in XYZ Ltd. $65,000
o Corporate tax rate 40%
Calculate the tax on Interest Income, tax on Capital Gain and tax on Dividend Income.

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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