Raising Funds How a business manages its finances is a key factor in whether or not that business succeeds. Where do businesses find the money to get started?
Lesson Objective Compute the taxable income and the corporate income tax. Content Vocabulary corporation Businesses owned by stockholders. taxable income The portion of a company’s gross income that remains after normal business expenses are deducted, upon which taxes are based. • corporation • taxable income
Example 1 Dot-Software had a gross income of $558,145 for the year. It had the following business expenses during the year:
Example 1 (cont.) What federal corporate income tax must Dot-Software pay?
Example 1 Answer: Step 1 Find the total deductions (expenses). Total for the table is $464,615 in deductions.
Example 1 Answer: Step 2 Find the taxable income. Annual Gross Income – Deductions $558,145 – $464,615 = $93,530
Example 1 Answer: Step 3 Find the federal corporate income tax. (Refer to Figure 22.1 on page 682 of your textbook.) $13,750 + 34% of ($93,530 – $75,000) = $13,750 + (0.34 × $18,530) = $13,750 + $6,300.20 = $20,050.20
Practice 1 Use Figure 22.1 on page 682 of your textbook to find the federal corporate income tax. The Aqua Bell Company has an annual gross income of $530,985. Their deductions total $198,024.
Practice 1 Answer $113,104.79
Practice 2 Use Figure 22.1 on page 682 or your textbook to find the federal corporate income tax. Gross income: $73,500 Deductions: $8,900
Practice 2 Answer $11,150