JKJ Manufacturing Inc.'s Income Statement for the year reported Sales Revenue of $44,350,000. Cost of Goods Sold was 35% of Sales Revenue. Sales, Administration and Distribution expenses were $19,750,000. Interest charges amounted to $1,200,000. There were no differences between accounting income and taxable income. If the federal tax rate is 20.5% and the provincial rate is 16%, what is JKJ Manufacturing Inc.'s taxes payable?

Question

Quizplus · Accepted Answer

To calculate taxes payable, first determine the net income before taxes. Sales Revenue ($44,350,000) minus Cost of Goods Sold (35% of $44,350,000 = $15,522,500) minus Sales, Administration, and Distribution expenses ($19,750,000) minus Interest charges ($1,200,000) equals $7,877,500. The combined tax rate is 20.5% (federal) + 16% (provincial) = 36.5%. Taxes payable is $7,877,500 * 36.5% = $2,875,287.50.