Griffey Communications recently realized $120,000 in operating income.The company had interest income of $25,000 and realized $70,000 in dividend income.The company's interest expense was $40,000.Its corporate tax rate is 25%.Griffey is a small company,so it is not subject to the interest expense deduction limitation. Assume a 50% dividend exclusion for tax on dividends.

Question

Quizplus · Accepted Answer

To calculate the taxable income: Operating income ($120,000) + Interest income ($25,000) + 50% of Dividend income ($70,000 * 50% = $35,000) - Interest expense ($40,000) = $140,000. Tax = $140,000 * 25% = $35,000.

Griffey Communications Recently Realized $120,000 in Operating Income