Answer:
a) $4,582 b) $1,400 c) $3,900 d) $52,000 e) $7,160
Explanation:
The assumption is that the marginal tax rate is 21%
Therefore,
a) Calculate the after tax cost on $5,800 premium on business property and casualty insurance
First, it should be noted that the insurance premium on business property and casualty is tax deductible therefore, the calculation is as follows
$5,800 - ($5,800 x 0.21)
= $5,800 - $1,218
= $4,582
b) $1,400 fine paid for business entertainment
The fine paid on business entertainment is not tax deductible hence the after tax cost remains $1,400
c) $3,900 premium on key-person life insurance
Life insurance premium is not tax deductible, therefore the after tax cost remains $3,900
d) $52,000 political contribution
This political contribution is also not tax deductible, the after tax cost remains $52,000
e) $8,000 client meals
The congress has only allowed a deduction of 50% of most business meals
Therefore
$8,000 - ($4000 x 0.21)
$8,000- 840
=$7,160
