Builtrite had sales of $700,000 and COGS of $280,000. In addition, operating expenses were calcul...
Builtrite had sales of $700,000 and COGS of $280,000. In addition, operating expenses were calculated at 25% of sales. Builtrite also received dividends of $50,000 and paid out common stock dividends of $25,000 to its stockholders. A long-term capital gain of $70,000 was realized during the year along with a capital loss of $50,000
Based on the above information, answer the following 4 questions:
1.What is Builtrite’s taxable income?
2. Based on their taxable income, what is Builtrite’s tax liability?
3.
If we add to our problem that Builtrite also had $10,000 in interest expense, which of the following statements is correct (assuming the same marginal tax rate of 39%)?3.
| Taxable income would increase by $10,000 | ||||||||||||||
| Taxable income would decrease by $10,000. | ||||||||||||||
| Taxable income would decrease by $6,100. | ||||||||||||||
| Taxable income would increase by $6,100 4. If Builtrite had experienced a long-term capital loss of $80,000 (instead of the $50,000 long-term capital loss stated in the problem), and still had the $70,000 long-term capital gain stated in the problem, which of the following is correct:
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