Question

Higgins Company plans to incur $380,000 of salaries expense if a capital project is implemented. Assuming a 40% tax rate, the salaries should be reflected in the analysis by a:__________.
a) $152,000 inflow.
b) $380.000 outflow.
c) $228,000 inflow.
d) $228,000 outflow.
e) $152,000 outflow.

Answer 1

Answer:

d) $228,000 outflow

Explanation:

Calculation for the amount that the salaries should be reflected in the analysis

Using this formula

Salaries=Salaries expense-(Salaries expense*Tax rate)

Let plug in the formula

Salaries=$380,000-($380,000*40%)

Salaries=$380,000-$152,000

Salaries=$228,000 Outflow

Therefore salaries should be reflected in the analysis by a: $228,000 outflow