How do you find the taxable income?
Ok I have this problem I need help with and I can't get the taxable income. Can someone please help. Heres the problem: 2007 Cost of goods sold $3,419 Interest 187 Dividends 370 Depreciation 892 Change in retained earnings 228 Tax Rate 35% What is the taxable income for 2007?
Public Comments
- Change in retained earnings of 228 is the same as net income after taxes, less dividends paid. Assuming the dividends of 370 are dividends paid, you need to add that to 228 to get net income after taxes. To figure the net income before taxes (i.e. taxable income), the formula is: Net income after tax before dividends pd divided by (1 minus the Tax Rate) = Net income before taxes For this example it would look like this: (228 + 370) / (1 - .35) = 598 / .65 = 920 This assumes that the 370 is dividends paid and that all the relevant information is here. I recommed you use this information and refer to your textbook to confirm.
