Chapter 18, Problem 30AT

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

You are the lax consultant for Fidelity Manufacturing, Inc. If the company had taxable income of $875,500 last year, calculate:

**a.** Corporate tax liability.

**b.** Net income after taxes.

**(a)**

To determine

**To calculate:** The corporate tax liability for the tax consultant of Fidelity Manufacturing, Inc and company has taxable income of $875,500 last year.

Explanation

**Given Information:**

The company Fidelity Manufacturing, Inc had taxable income of $875,500 last year.

**Formula used:**

To calculate the corporate income tax, there are some rules given in the book, using the Corporate Tax Rate Schedule, Exhibit 18-6.

Step 1: Read the range of income and check in which range given companyâ€™s income is lying.

Step 2: Subtract the lower number of the range from the taxable amount.

Step 3: Multiply the result from step 2 by the tax rate listed for that range.

Step 4: Calculate the tax liability by adding the result from step3 to the dollar amount of tax indicating for that range.

Step 5: Find the net income after taxes by subtracting the tax liability from the taxable income.

**Calculation:**

Fidelity Manufacturing, Inc., had net income before taxes is $875,500.

Step 1: The taxable income falls in the range 335,000 to 10,000,000.

Step 2: Subtract the lower number of the range from the taxable amount.

Step 3: Multiply the result from step 2 by the tax rate listed for that range.

**(b)**

To determine

**To calculate:** The net income after taxes for the tax consultant of Fidelity Manufacturing, Inc. and company has taxable income of $875,500 last year.

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