In 2017,Apricot Corporation had taxable income of $120,000.Included in taxable income was a $10,000 capital gain.The $120,000 of taxable income does not include a $15,000 capital loss carryforward available from the previous year.What is Apricot Corporation's 2017 income tax liability before any tax credits?

Question

Quizplus · Accepted Answer

The first step is to calculate the corporation's taxable income after considering the capital gain and the capital loss carryforward:

Taxable income = $120,000 (from operations) + $10,000 (capital gain) - $15,000 (capital loss carryforward) = $115,000

Next, we need to use the corporate tax rate schedule to calculate the income tax liability:

- The first $50,000 of taxable income is taxed at a rate of 15%: $50,000 x 0.15 = $7,500
- The next $25,000 of taxable income is taxed at a rate of 25%: $25,000 x 0.25 = $6,250
- The remaining $40,000 of taxable income is taxed at a rate of 34%: $40,000 x 0.34 = $13,600

Adding these three amounts gives us the total income tax liability before any tax credits:

$7,500 + $6,250 + $13,600 = $27,350

Therefore, the correct answer is B) $26,150.

In 2017,Apricot Corporation Had Taxable Income of $120,000