(Appendix 8C)Stars Corporation Has Provided the Following Information Concerning a Capital

question 122

Multiple Choice

(Appendix 8C) Stars Corporation has provided the following information concerning a capital budgeting project: The working capital would be required immediately and would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. The income tax expense in year 2 is:

• A)$9, 000
• B)$15, 000
• C)$3, 000
• D)$6, 000

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Definitions:

FUTA Expense

The total cost incurred by an employer for the Federal Unemployment Tax, contributing to the U.S. government's unemployment fund.

Form 941

A federal tax form used by employers to report quarterly income taxes, social security tax, and Medicare tax withheld from employees' paychecks.

Form 940

A tax form filed by employers to report annual Federal Unemployment Tax Act (FUTA) tax.

Form W-2

An IRS tax form used in the United States to report wages paid to employees and the taxes withheld from them.