Please show work so I can learn. Thank you. A mail-order computer company sells
ID: 2719915 • Letter: P
Question
Please show work so I can learn. Thank you.
A mail-order computer company sells personal computers and peripherals. The company leased showroom space and a warehouse for $20,000 a year and installed $290,000 worth of inventory-checking and packaging equipment. The allowed depreciation expense for this capital expenditure ($290,000) amounted to $58,000 using the category of a 5-year MACRS. The store was completed and operations began on January 1st. The company had a gross income of $1,250,000 for the calendar year. Supplies and all operating expenses (other than the lease expense) were itemized as:
Cost of merchandise sold in the year: $600,000
Employee salaries and benefits: $150,000
Other supplies and expenses: $90,000
How much will the company pay in federal income taxes for the year?
Explanation / Answer
Answer: First we compute the taxable income as follows:
Income rax=112710
Average tax rate=(112710/332000)*100=33.9%
Particulars Amount ($) Gross Revenue 1250000 Expenses: 840000 (600000+150000+90000) Lease expenses 20000 Depreciation 58000 Taxable income 332000