Question

For Amazon 2018, If Congress voted to eliminate corporate taxes, what would be the effect on your company's income statement and balance sheet? Defend your response. Calculate the income tax rate for your chosen company. What effect will an increase in income of $2,000,000 have on your company? What are the effects on the balance sheet and income statement? Justify your response. How much did your company pay in foreign taxes last year? What percentage of its income is United States vs. foreign?

Answer 1

1. If congress eliminates the corporate taxes for Amazon there would not be much effect on the Income Statement but therer will be more profits will be transfered to the reserves and surplus accounts that would eventually means more money for the shareholder of the company because of this companies capital Adequacy ratio will be high that means comapnay will be able to absorbs more losses from there permanent capital which from the investers point of view is great. If corporate taxes are eliminated company will have more income for the purpose for Research & development purpose and also to higher more people this would also help to reduce the employment rate in the country will reduce. One the best part of this will be that comapny will be able to compete globally more effeciently becuase more income available to distribute to other branches with more potential with almost zero cost because this is coming from the permanent funds.

2. With a increase in income of $2000000 will have great impact on the company we as a company would be able to higher more qualified and more experience professionals which would also help to increase the market of the company and would also help to work more effeciently and we would also have money to go and innovate in more risky technology before we could not do that because restrain of availability of money and we would also be able to give our exsiting employees raises too.

3. The effect in the income statement will be that with the certain rise in the income compared to last financials years the investors will get a wrong view of the company unless the sourece of income is permanent investors will invest money on the flase assumption that the company is making xxxxxxxxx amount of money but in the next year the income will be back to the normal and the investors as well as the shareholders will start paniking because in the sudden fall of income in the current year so will the credit facility comapnies that have invested in you this will end very badly if the increase in the income is not permanent and same thing will happen in the ballance sheet also the profit for the current year will be inflated causing higher balances in the balance sheet without actual increase in the operations. If the increase in the income is not permanent then to be safe from all this missconfusion among the stakeholders they should disclose that $2000000 as extraordinary income in the income statement that would probably help in clearing the condusion among the stakeholders.

4. My Company Name id FLY BY Avations LLP it is an indian based comapny that helps student for geting there CPA license for becoming a pilot and we send our student for aircraft training to USA and we also have a branch over there. Last Year our company paid foregin taxes over $500,000.

5. Our 60% our income is foregin (From USA) and 40% is from India.