Question
In: Accounting
JDD Corporation provides the following benefits to its employee, Ahmed (age 26): Salary $ 323,000 Health...
JDD Corporation provides the following benefits to its employee, Ahmed (age 26):
| Salary | $ | 323,000 | |
| Health insurance | 12,500 | ||
| Dental insurance | 3,900 | ||
| Life insurance | 5,400 | ||
| Dependent care | 4,400 | ||
| Professional dues | 1,380 | ||
| Personal use of company jet | 278,000 | ||
Assume the life insurance is a group-term life insurance policy
that provides $226,000 of coverage for Ahmed. (Use EXHIBIT
12-10.)
a. Assuming Ahmed is subject to a marginal tax
rate of 30 percent, what is his after-tax benefit of receiving each
of these benefits (ignoring FICA taxes)? (Enter all amounts
as positive values. Round your intermediate computations and final
answers to the nearest whole dollar.)
Solutions
Expert Solution
SOLUTION
The after-tax benefit of Ahmed’s salary and benefits is $448,199, calculated as follows:
| S.No. | Particulars | Amount ($) | Explanation |
| Taxable Benefits | |||
| 1 | Salary | 323,000 | |
| 2 | Personal use of company jet | 278,000 | |
| 3 | Life Insurance (taxable portion) | 270 | ($150,000 * (0.15 cents per $1,000) *12 |
| 4 | Taxable Total | 601,270 | (1+2+3) |
| 5 | Marginal tax rate | 30% | |
| 6 | Income tax on benefits | 180,380 | (4*5) |
| 7 | After-tax benefit of taxable items | 420,889 | (4-6) |
| Nontaxable Benefits | |||
| 8 | Health Insurance | 12,500 | |
| 9 | Dental Insurance | 3,900 | |
| 10 | Life Insurance (nontaxable portion) | 5,130 | (5,400-270) |
| 11 | Dependent Care | 4,400 | |
| 12 | Professional Dues | 1,380 | |
| 13 | Nontaxable Total | 27,310 | (8+9+10+11+12) |
| After-tax benefit of salary and benefits | 448,199 | (7+13) |
ekkarill92 answered 2 years agoRelated Solutions
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$
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Health insurance
12,500
Dental insurance
3,900
Life insurance
5,400
Dependent care
4,400
Professional dues
1,380
Personal use of company jet
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Assume the life insurance is a group-term life insurance policy
that provides $226,000 of coverage for Ahmed. (Use EXHIBIT
12-10.)
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Dental
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Salary
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Health
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Dental
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Life
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Dependent
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Professional
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Health
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Dental
insurance:
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Life
insurance:
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Dependent
care: $5,000
Professional
dues:
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Personal use of company
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