Lintner Beverage Corp Calculate Lintner's Total Tax Liability Using the Corporate Tax Schedule

question 28

Multiple Choice

Lintner Beverage Corp.reported the following information from their financial statements: $$\begin{array} { l r } \text { Operating income (EBIT) } = & \$ 10,500,000 \\\text { Interest payments on long-term debt } = & \$ 1,750,000 \\\text { Dividend income } = & \$ 1,000,000\end{array}$$
Calculate Lintner's total tax liability using the corporate tax schedule below: $\begin{array}{lrr}\text { Taxable Income } & \text { Tax on Base of Bracket } & \text { Percentage on Excess above Base } \\\$ 0-\$ 50,000 & \$ 0 & 15 \% \\\$ 50,000-\$ 75,000 & 7,500 & 25\\\$ 75,000-\$ 100,000 & 13,750 & 34 \\\$ 100,000-\$ 335,000 & 22,250 & 39 \\\$ 335,000-\$ 10,000,000 & 113,900 & 34\\\$ 10,000,000-\$ 15,000,000 & 3,400,000 & 35 \\\$ 15,000,000-\$ 18,333,333 & 5,150,000 & 38 \\\text { Over } \$ 18,333,333 & 6,416,667 & 35\end{array}$
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Assume a 70% dividend exclusion for tax on dividends.

• A) $2,892,380
• B) $3,692,400
• C) $3,292,390
• D) $2,738,530
• E) $3,077,000

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Definitions:

One-sample Z Statistic

A statistical measure used to determine how many standard deviations a single sample mean deviates from the population mean, assuming the population variance is known.

One-sample T Statistic

A statistical measure used to compare the mean of a single sample to a known or hypothesized population mean.

Null Hypothesis

In statistical hypothesis testing, a statement that there is no effect or no difference, and any observed deviation from this is due to sampling or experimental error.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, commonly denoted by alpha.