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solong [7]
2 years ago
7

Relix, Inc., is a domestic corporation with the following temporary timing differences for the current year. The building deprec

iation for tax purposes exceeds book depreciation by $13,000. The furniture and fixtures depreciation for tax purposes exceeds book depreciation by $3,800. The accrued litigation expenses in the amount of $16,000 are deductible for book purposes but not yet deductible for tax. The book-tax basis differences for the deferred assets and liabilities are listed below.
Beginning of year Current-year diff-e End of year
Gross deferred tax asset $7,140 $3,360 $10,500
Gross deferred tax liability ($12,852) ($3,528) ($16,380)
In addition to the temporary differences above, Relix reported two permanent differences between book and taxable income. It earned $2,375 in tax-exempt municipal bond interest, and it incurred $780 in nondeductible business meals expense. Relix's book income before tax is $4,800. Assume a 21% Federal corporate tax rate and no valuation allowance.
Compute Relix's total provision for income tax reported in its financial statements, and determine its book net income after tax.
If required, round your answers to the nearest dollar.
Book net income before tax $4,800
Provision for income tax expense $
Net income after tax $
Business
1 answer:
Rina8888 [55]2 years ago
3 0

Answer:

Computation of Provision for income tax expense

Particulars                                                      Amount

Pre tax financial income                                $4,800

Add: Non deductible business meal            $780

Less: Tax exempt interest                            -$2,375

Less: Book tax difference in depreciation  -$16,800

of building and Furniture & fixtures

Add: Accured litigation expenses                 <u>$16,000</u>

Taxable Income                                              <u>$2,405</u>

Provision for income tax Expense

Current Tax (21% of $2,405)                      $505

Deferred tax liability                                   $3,528

Deferred tax asset                                     -<u>$3,360</u>

Total Provision for income tax expense  <u>$673</u>

<u />

Computation of book net income after tax

Particulars                                                    Amount

Book net income before taxes                   $4,800

Less: Provision for income tax expense   -<u>$673</u>

Net Income after tax                                   <u>$4,127</u>

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Answer:

C. All else being equal, the growth rate of the dividends is greater than 2%

Explanation:

The formula to calculate the fair price of a stock with a constant growth in dividends is as follows,

  • P = D1 / r-g
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  • r is the required rate of return
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  • P = 1.5 / 0.1 - 0.02 = 18.75
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So, we will be willing to pay more than 18.75 if the fair price per share today is greater than 18.75. We check all the 3 options.

A. say the required rate is 10.1%

  • P = 1.5 / (0.101 - 0.02) = 18.52
  • So if the required rate of return increases from 10%, the fair price per share is falling and we will be willing to pay less than 18.75 per share.

B. P = 1.2 / (0.1 - 0.02) = 15

  • If D1 = 1.2,the fair price per share will be 15 which is less so we will not be willing to pay more than 15 for such share.

C. Say the growth rate in dividends is 2.1%

  • P = 1.5 / (0.1 - 0.021) = 18.99
  • The fair price per share increased to 18.99 if the growth rate in dividend increases by 0.1 percentage point. Thus, C is the correct answer

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2 years ago
IBM has just issued a callable (at par) 10 year, 6% coupon bond with annual coupon payments. The bond can be called at par in on
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The bond can be called at par in one year or anytime thereafter on a coupon payment date. Ithas a price of $97 per $100 face value

<h3>What is bond?</h3>

A bond is a type of financial security in which the issuer owes the holder a debt and is obligated to repay the principal of the bond as well as interest over a specified period of time, depending on the terms. Interest is usually paid at regular intervals.

Bonds are one way for businesses to raise funds. A bond is a loan made between an investor and a corporation. The investor agrees to give the corporation a specific sum of money for a set period of time. In exchange, the investor receives interest payments on a regular basis.

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8 0
1 year ago
WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for t
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Answer:

B) yes no yes

Explanation:

The preparation is shown below:

Particulars Product X Product Y Product Z

Units produced 1,600           2,100         3,100

Sales Value at split off per unit $14 $19 $16

Total Sales Value at split off   (a) $22,400 $39,900 $49,600

Units produced 1,600 2,100 3,100    (X)

Sales Value per unit $20 $20 $25

Additional Processing cost per unit $5 $7 $7

Net Realizable Value = Sales value - Further costs $15 $13 $18 (y)

Total Realizable Value if processed further (b) $24,000 $27,300 $55,800   (x × Y)

Difference = b- a $1,600 -$12,600          $6,200

Processed further Yes            No               Yes

As the product X and product Z contains positive number so it should be processed and Product Y should not be processed as it contains negative number

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3 years ago
On September 12, Vander Company sold merchandise in the amount of $4,600 to Jepson Company, with credit terms of 2/10, n/30. The
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Answer:

Dr Cash 4,116

Dr Sales discounts 84

Cr Accounts receivable 4,200

Explanation:

Vander Company Journal entry

Dr Cash 4,116

(4,200-82)

Dr Sales discounts 84

Cr Accounts receivable 4,200

Calculation of Sales discounts

4,200*2%

=84

Merchandise

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=4,200

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Social Security payments, welfare payments, and veterans' payments that the government makes directly to households are called government public transfer payments.

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A payment paid without any expectation of receiving current or future goods or services in exchange. Welfare payments, unemployment insurance benefits, and Social Security benefits are examples of government transfer payments. Taxes are regarded as transfers.

In what two ways does the government give out transfer payments?

Transfer payments are not included in the GDP calculation since they are not intended to compensate for economic production. Instead, transfer payments are viewed as income redistribution. Welfare programs and social insurance programs are two important categories of transfer payments

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