Lintner Beverage Corp.reported the following information from their financial statements:
Operating income (EBIT)= $20,000,000
Interest payments on long-term debt = $1,750,000
Dividend income = $1,000,000
Calculate Lintner's total tax liability using the corporate tax schedule below:

Question

Quizplus · Accepted Answer

First, we need to calculate Lintner's taxable income:
Taxable income = EBIT - Interest payments - Dividend income = $20,000,000 - $1,750,000 - $1,000,000 = $17,250,000

Using the corporate tax schedule provided, we can find that the tax liability is:
$3,750,000 + 34% x (Taxable income - $15,000,000) = $6,492,500

Therefore, the answer is choice B.