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Shering Distributors Inc - Interest versus dividend income  - 6 Oct, 2014

Interest versus dividend income

During the year just ended, Shering Distributors, Inc., had pretax earnings from operations of $490,000. In addition, during the year it received $20,000 in income from interest on bonds it held in Zig Manufacturing and received $20,000 in income from dividends on its 5% common stock holding in Tank Industries, Inc. Shering is in the 40% tax bracket and is eligible for a 70% dividend exclusion on its Tank Industries stock.

a. Calculate the firm's tax on its operating earnings only.

b. Find the tax and the after-tax amount attributable to the interest income from Zig Manufacturing bonds.

c. Find the tax and the after-tax amount attributable to the dividend income from the Tank Industries, Inc., common stock.

d. Compare, contrast, and discuss the after-tax amounts resulting from the interest income and dividend income calculated in parts b and c.

e. What is the firm's total tax liability for the year?


Explains the calculation of tax and after tax amount for interest and dividend.



Category : Financial Management

Search Keywords :
Shering , Interest , Dividend , Tax , Zig , Tank , Exclusion 


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Answer  - 6 Oct, 2014
Please see the excel attachment....


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