"The Columbus Electrical Company expects to have an annual taxable income of $720,000 from its residential...

"The Columbus Electrical Company expects to have an annual taxable income of $720,000 from its residential accounts over the next two years. The company is bidding on a two-year wiring service for a large apartment complex. This commercial service requires the purchase of a new truck equipped with wire-pulling tools at a cost of $65,000. The equipment falls into the MACRS five-years class and will be kept for 10 years. The project will bring an additional annual revenue of $220,000, but it is expected to incur additional annual operating costs of $174,000. Using the Corporate Tax Schedule on Table 9.12, what is the total amount that Columbus Electrical will have to pay in taxes in year 2 if the company decides to work on the project?"

Expert Solution

Year	1	2
Current income	720,000	720,000
New tools	65,000
Depreciation (0.241)	15,665	15,665
Additional revenue	220,000	220,000
Additional operating cost	174,000	174,000
Taxable income	750,335	750,335

Tax schedule-
Taxable income over	tax is	+	of the amount over	$750335-$500000	additional tax	Total tax
$500000	$150689.5	37%	$500000	$250335	$92623.95	$243313.45
hence, total tax payable is $243313.45 in year 2

ekkarill92 answered 1 year ago

Taxable account versus traditional IRA. Tom Shilling expects to have $10,000 of taxable income to commit...

Taxable account versus traditional IRA. Tom Shilling expects to have $10,000 of taxable income to commit to his retirement savings each year for the next 30 years. His investments will be made at the end of the year. His tax rate is 30% and his investments will earn 8% annually. If Tom invests in a taxable account, his annual investment is reduced by his income taxes, and his annual return on investments will also be reduced by 30%. If tom...

The pretax financial income of Sweet Company differs from its taxable income throughout each of 4...

The pretax financial income of Sweet Company differs from its taxable income throughout each of 4 years as follows. Year Pretax Financial Income Taxable Income Tax Rate 2020 $277,000 $184,000 35 % 2021 291,000 233,000 20 % 2022 336,000 272,000 20 % 2023 402,000 560,000 20 % Pretax financial income for each year includes a nondeductible expense of $32,900 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is...

The pretax financial income of T Company differs from its taxable income throughout each of 4...

The pretax financial income of T Company differs from its taxable income throughout each of 4 years as follows. Pretax Year Financial Taxable Income Income Tax Rate 2017 $290000 $180000 35% 2018 320000 225000 40 2019 350000 260000 40 2020 420000 560000 40 The difference between pretax financial income and taxable income in each period is due to a temporary diffence related to depreciation. No deferred income taxes existed at the beginning of 2017. Required: a) Prepare...

The pretax financial income of Swifty Company differs from its taxable income throughout each of 4...

The pretax financial income of Swifty Company differs from its taxable income throughout each of 4 years as follows. Year Pretax Financial Income Taxable Income Tax Rate 2017 $285,000 $178,000 35 % 2018 318,000 234,000 40 % 2019 381,000 282,000 40 % 2020 402,000 593,000 40 % Pretax financial income for each year includes a nondeductible expense of $28,600 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is...

The pretax financial income of Indigo Company differs from its taxable income throughout each of 4...

The pretax financial income of Indigo Company differs from its taxable income throughout each of 4 years as follows. Year Pretax Financial Income Taxable Income Tax Rate 2020 $310,000 $183,000 35 % 2021 308,000 231,000 20 % 2022 345,000 279,000 20 % 2023 408,000 535,000 20 % Pretax financial income for each year includes a nondeductible expense of $29,900 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is...

The pretax financial income of Truttman Company differs from its taxable income throughout each of 4...

The pretax financial income of Truttman Company differs from its taxable income throughout each of 4 years as follows. Year Pretax Financial Income Taxable Income Tax Rate 2020 $290,000 $180,000 35 % 2021 320,000 225,000 20 % 2022 350,000 260,000 20 % 2023 420,000 560,000 20 % Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is...

Felix and Freddie are married with annual taxable income of $230,000. They pay income tax according...

Felix and Freddie are married with annual taxable income of $230,000. They pay income tax according to the following schedule: Over--------But Not Over---------Tax Rate $0.................$43,850...................15% $43,850..........$105,950..................??? $105,950........ $361,450.................31% If the total personal income tax they pay is $59,316, which of the following comes closest to the tax rate for income between $43,850 and 105,950 (the middle tax rate)?. a. 24% b. 23% c. 25% d. 21% e. 22%

If a company excluded the tax refund from taxable income, and did not record an unrecognized...

If a company excluded the tax refund from taxable income, and did not record an unrecognized tax benefit, what must the company believe about whether the IRS and tax courts will challenge and allow this exclusion? Explain using the language of FIN 48.

"Florida Citrus Inc. (FCI) estimates its taxable income at $7,100,000. The company is considering expanding its...

"Florida Citrus Inc. (FCI) estimates its taxable income at $7,100,000. The company is considering expanding its product line by introducing a low-calorie sport drink for next year. It expects that the additional taxable income next year from this sport drink will be $1,800,000. Use the Corporate Tax Schedule, Table 9.12, to calculate how much FCI will pay in federal income taxes next year if it produces the low-calorie sport drink?"

Randolph Company reported pretax net income from continuing operations of $1,003,000 and taxable income of $710,000....

Randolph Company reported pretax net income from continuing operations of $1,003,000 and taxable income of $710,000. The book-tax difference of $293,000 was due to a $283,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $140,000 due to an increase in the reserve for bad debts, and a $150,000 favorable permanent difference from the receipt of life insurance proceeds. Randolph Company’s applicable tax rate is 34 percent. a. Compute Randolph Company’s current income tax expense. b. Compute Randolph...

Question