Question

Last year, Hampton Corporation had sales of $1,855,000. The firm's costs of goods sold amounted to 70% of sales. Hampton also paid operating expenses of $225,000, and $26,500 in interest expense. Also, the firm received $40,000 in dividend income and experienced a $10,000 capital gain on the sale of property. Compute the corporation's tax payment.

Answer 1

Answer:

Tax Liability = $74,550

Explanation:

Particular                                   Amount

Sales                                             $1,855,000

Less: COGS(70% of sales)           $1,298,500

Gross Profit                                   $556,500

Less: Operating expenses           $225,000

Operating profit                            $331,500

Add: Taxable dividend income    $40,000

Add: Capital gain                           $10,000

Less: Interest Expenses                $26,500

Net Taxable Income                      $355,000

Tax rate = $355,000 * 21%  

Tax Liability = $74,550

Note: 21% is the Tax rate approved by the Tax cuts and Job Acts of 2017.