You were provided with the following balance sheet for Golden Cup firm for the year ended Dec 31st, 2015.
Consolidated Balance sheet Golden Cup.
As of Dec 31st, 2015
Total Current Assets
Property, Plant, and Equipment Goodwill
Total Fixed Assets Total Assets
Liabilities + Owners Equity Current Liabilities
Current Assets Cash
40,000 4,000 14,000 58,000
Accounts Payable Notes Payable Accrue Wages
Total Current Liabilities
Long term debt
12,000 6,000 1000 19,000
40,000 39,000 79,000 138,000
Retained Earnings Total Owners equity
138,000 Liabilities + O.E
In addition to that, you know the following facts about firm’s operations throughout the year:
- Golden Cup revenues for the year includes the following: Domestic revenues $160,000. International revenues $80,000. Out of Golden Cup’s sales, cost of sales and direct labor is 50% of annual revenues.
- Because of the strong competition that it faces, Golden Cup has a generous marketing plan. Golden Cup signed a contract with the marketing planet Inc. by which the marketing agency will be responsible for Golden Cup marketing for five years period started this year. The contract costs Golden Cup $100,000 that were paid up front, however the company thinks this plan will affect its sales evenly over the five years period. Golden Cup also spends $30,000 in the form of general and administrative expenses per year. Golden Cup depreciable assets historical value is $40,000 and is depreciated on a straight line basis over 10 years.
- Golden Cup pays interest rate of 10% on its Long-term debt outstanding.
- Out of the year’s net income, Golden Cup is planning to repay $30,000 to its shareholders in the form of cash dividends. The company currently has 60,000 shares outstanding
1- Please set up income statement for Golden Cup: Consolidated Income Statement Golden Cup.
- As of Dec 31st, 2015 Revenues
- (-) Cost of goods sold
- Gross margin
- (-) Marketing expenses
- (-) General and administrative expenses (-) Depreciation
- (-) Interest expenses
- (-) Tax expenses
- Net income Dividends
- Additions to Retained Earnings Please use the U.S corporate tax rates to calculate Golden Cup tax liability. a- What is the marginal tax rate of Golden Cup? b- What is the average tax rate of Golden Cup?
2- Ms. Janet McInish works as an elementary school teacher and has a taxable income from her job of $35,000. She inherited 10% of Golden Cup shares outstanding, and recently received her annual dividends.
a- What is the amount of annual dividends received by Ms. McInish?
b- What is Ms. McInish total tax liability if her tax status is (married filing together?