Mauve Corporation began operations as a farm supplies business and used a fiscal
ID: 2602375 • Letter: M
Question
Mauve Corporation began operations as a farm supplies business and used a fiscal year ending October 31. The company gradually went out of the farm supplies business and into the mail-order Christmas gifts business. The company has received permission from the IRS to change to a fiscal year ending January 31, effective for the year ending January 31, 2018. For the short period November 1, 2017, through January 31, 2018, Mauve earned $20,000. Calculate Mauve’s tax liability for the short period November 1, 2017, through
January 31, 2018.
Explanation / Answer
Step 1 - Calculation of Taxable Income for Mauve Corporation
Total Income of Mauve Corporation
($20000*12 Month) / 3 Month = $80000
Step 2 - Calculation of Tax Liability
Tax Liability for 3 Months = ($15450*3/12) = $3862.5
Particulars Tax Rate Tax Amount $50000 15% $7500 $25000 25% $6250 $5000 34% $1700 $80000 $15450