Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Incorporated, which manufactures greeting cards. Toto’s average annual net profit (before deduction of Mr. Lion’s salary) is $200,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.) Mr. Lion’s salary is $100,000, and Toto pays no dividends. Mr. Lion’s salary is $100,000, and Toto distributes its after-tax income as a dividend.
Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Incorporated, which manufactures greeting cards. Toto’s average annual net profit (before deduction of Mr. Lion’s salary) is $200,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.) Mr. Lion’s salary is $100,000, and Toto pays no dividends. Mr. Lion’s salary is $100,000, and Toto distributes its after-tax income as a dividend.
Chapter13: Comparative Forms Of Doing Business
Section: Chapter Questions
Problem 8DQ
Related questions
Question
Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Incorporated, which manufactures greeting cards. Toto’s average annual net profit (before deduction of Mr. Lion’s salary) is $200,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.)
- Mr. Lion’s salary is $100,000, and Toto pays no dividends.
- Mr. Lion’s salary is $100,000, and Toto distributes its after-tax income as a dividend.
My solutions: 1. $58,000, 2. $87,230
This was a homework problem that I missed. Could you please explain how to do it correctly?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT