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:

Cost of Goods Manufactured

The total production cost of goods completed during a specific period.

Work in Process Inventory

The value of unfinished goods in the manufacturing process, including materials, labor, and overhead costs accrued.

Indirect Materials

Indirect materials are supplies used in the production process that do not become an integral part of the finished product and are not directly traceable to specific goods or services produced.

Raw Materials

The basic materials and inputs used in the production process to manufacture finished goods.