Daisy, Inc

question 12

Essay

Daisy, Inc., has taxable income of $850,000 during 2014, its first year of operations. Daisy distributes dividends of $200,000 to its 10 shareholders (i.e., $20,000 each). Daisy earmarks $361,000 of its earnings for potential future expansion into other cities.
a. Calculate Daisy's total tax liability associated with the current tax year if the $361,000 is treated as representing reasonable needs of the business.
b. Calculate Daisy's total potential tax liability associated with the current tax year if none of the $361,000 qualifies as reasonable needs of the business.

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Definitions:

Financial Statements

Documents that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.

Registration Statement

A registration statement is a set of documents, including a prospectus, filed with the SEC by a company intending to go public, detailing its business and financial status.

Willfully Violates

Refers to the act of intentionally breaking a law or regulation.

Securities Act of 1933

A U.S. law enacted in response to the stock market crash of 1929 that aims to ensure more transparency in financial statements so investors can make informed decisions.