Preview

Wk 1 Fi 505

Satisfactory Essays
Open Document
Open Document
392 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Wk 1 Fi 505
2-6 – Statement of Retained Earnings
In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much dividends was paid to shareholders during the year?
Net Income = 50 million
Retained Earnings = 810 million
Retained Earnings beginning of the year = 780 million
Amount of RE generated this year = 810 – 780 = 30 million
NI = Dividends + RE
50 million = Dividends + 30 million
Dividends= 50 – 30 = 20 million
2-7 – Corporate tax liability
The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charges of $50000 (2) dividends received of $15,000 (3) dividends paid of $25000 and (4) income taxes. What are the firms income tax liability and its after tax income? What are the company’s marginal and average tax rates on taxable income?
Income $365,000

Less Interest deduction (50,000)

Plus: Dividends received 4,500

Taxable income $319,500
For a corporation, 70% of dividends received are excluded from taxes; therefore, taxable dividends are calculated as $15,000(1 – 0.70) = $4,500.

Tax = $22,250 + ($319,500 – $100,000) (0.39) = $22,250 +$85,605 = $107,855

After-tax income: Taxable income $319,500 Taxes (107,855)

Plus: Non-taxable dividends received 10,500 Net income $222,145

Non-taxable dividends are calculated as $15,000 × 0.7 = $10,500. The company’s marginal tax rate is 39%. The company’s average tax rate is $107,855/$319,500 = 33.76%

2-9 – Corporate after tax yield

The Shrieves Corporation has $10,000 that it plans to invest in marketable securities. It is choosing among ATT bonds, which yield 7.5%, state of Florida muni bonds, which yield 5% (but not taxable), and ATT preferred stock, which a dividend yield of 6%. Shrieves corporate tax rate is 35% and 70% of the dividends are tax exempt. Find the after tax rates of return on all three

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Fi515 Week 1

    • 498 Words
    • 2 Pages

    For a corporation, 70% of dividends received are excluded from taxes; so taxable dividends are calculated with the remained 30%…

    • 498 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    4. (TCO B) Larsen Corporation reported $100,000 in revenues in its 2010 financial statements, of which $44,000 will not be included in the tax return until 2011. The enacted tax rate is 40% for 2010 and 35% for 2011. What amount should Larsen report for deferred income tax liability in its balance sheet at December 31, 2010? (Points : 6)…

    • 2248 Words
    • 9 Pages
    Good Essays
  • Powerful Essays

    Chapter 10

    • 1332 Words
    • 6 Pages

    34) [LO3] Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. Using the U.S. tax rate schedule, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate?…

    • 1332 Words
    • 6 Pages
    Powerful Essays
  • Satisfactory Essays

    Acc 552 Week 3

    • 532 Words
    • 3 Pages

    CORRECT In its most recent financial statements, Del-Castillo Inc. reported $65 million of net income and $870 million of retained earnings. The previous retained earnings were $860 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. 55,000,000…

    • 532 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Bus 379

    • 1928 Words
    • 8 Pages

    5. (TCO 1) Tato’s Pizza has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Tato’s Pizza net income?…

    • 1928 Words
    • 8 Pages
    Good Essays
  • Satisfactory Essays

    Acc/531 Week 3

    • 790 Words
    • 4 Pages

    7. Two corporations A and B have exactly the same risk and both have a current stock price of $100. Corporation A pays no dividend and will have a price of $120 one year from now. Corporation B pays dividends and will have price of $113 one year from now after paying the dividend. The corporations pay no taxes and investors pay no taxes on capital gains but pay a tax of 30% income tax on dividends. What is the value of the dividend that investors expect corporation B to pay one year from today?…

    • 790 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    Intro to Ch 5

    • 2529 Words
    • 11 Pages

    Houghton Company has the following items: common stock, $720,000; treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $313,000. What total amount should Houghton Company report as stockholders' equity?…

    • 2529 Words
    • 11 Pages
    Good Essays
  • Satisfactory Essays

    Week 4

    • 340 Words
    • 2 Pages

    A corporation has income of $62,000 from operations and a net long-term capital loss of $5,000. What is the corporation's taxable income for the year?…

    • 340 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Quiz 1 & 2

    • 6098 Words
    • 25 Pages

    Since the firm has $3,500,000 of net income, $950,000 = $3,500,000 - $2,550,000 will be left for dividends.…

    • 6098 Words
    • 25 Pages
    Satisfactory Essays
  • Satisfactory Essays

    2. A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Pa...…

    • 688 Words
    • 4 Pages
    Satisfactory Essays
  • Satisfactory Essays

    availableTranscripts

    • 1245 Words
    • 10 Pages

    $71,315.00 TAXABLE INTEREST INCOME: SCH B:.......................................... $0.00 TAX-EXEMPT INTEREST:..................................................... $0.00 ORDINARY DIVIDEND INCOME: SCH B:......................................... $0.00 QUALIFIED DIVIDENDS:..................................................... $0.00 REFUNDS OF STATE/LOCAL TAXES:............................................…

    • 1245 Words
    • 10 Pages
    Satisfactory Essays
  • Good Essays

    Hrm/531 Week 9

    • 1413 Words
    • 6 Pages

    He received a dividend of $2.00 per share at the end of 2002 and $3.00 per share at the end of 2003. At the end of 2004, Nico collected a dividend of $4.00 per share and sold his stock for $18.00 per share. What was Nico's realized holding period return? What was Nico's compound annual rate of return?…

    • 1413 Words
    • 6 Pages
    Good Essays
  • Better Essays

    Taxes Quiz

    • 2222 Words
    • 9 Pages

    At of the end of its accounting period, December 31, 2009, Great Marks Company has assets of $940,000 and liabilities of $300,000. During 2010, Great Marks sold $65,000 of capital stock and declared and paid $45,000 in dividends. What is the amount of net income during 2010, assuming that as of December 31, 2010, assets were $995,000, and liabilities were $270,000?…

    • 2222 Words
    • 9 Pages
    Better Essays
  • Satisfactory Essays

    Homework Week #1

    • 787 Words
    • 4 Pages

    1-6. You are a shareholder in a C corporation. The corporation earns $2 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 40% and the personal tax…

    • 787 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    Global Investments

    • 689 Words
    • 3 Pages

    4. Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440. She had purchased these shares on margin 12 months ago at a cost per share of $35. The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent. Robin also needs to pay loan rate of 3.0 percent. What is her total dollar return on this investment?…

    • 689 Words
    • 3 Pages
    Good Essays