Answer:
correct option is a) 10.2%; $2,245,000
Explanation:
given data
Gross dividends = $2,500,000
tax rate = 34%
inter company dividends = 70%
to find out
effective tax rate and net dividends
solution
Effective tax rate = (1 - Exclusion) × (Tax rate) ............1
Effective tax rate = (1 – 0.70) × (0.34)
Effective tax rate = 10.2 %
and
net dividends = Gross dividends - Tax ..................2
net dividends = $2,500,000 - [ $2,500,000 (1 – 0.70)×(0.34) ]
net dividends = $2,500,000 – $255,000
net dividends = $2,245,000
so correct option is a) 10.2%; $2,245,000
