Use the following information to answer the following question(s).
In 2004,A & K,Inc.expects operating income (earnings before interest and taxes)of $18,000,000.In addition,the corporation has $20,000,000 of debt outstanding with a 10 percent interest rate and will pay $1,000,000 in dividends to its common stockholders.
-Assume that A & K will receive no other sources of income during 2004.A & K's taxable income for 2004 will be:
A)$18,000,000.
B)$17,000,000.
C)$16,000,000.
D)$15,000,000.

Question

Quizplus · Accepted Answer

Taxable income is calculated as operating income minus interest expenses. Here, $18,000,000 - ($20,000,000 * 10%) = $16,000,000. Dividends do not affect taxable income.

Use the Following Information to Answer the Following Question(s)