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Shawn Bates was working to establish a business enterprise with four of his wealthy friends. Each of the five individuals would receive a 20 percent ownership interest in the company. A primary goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume that the five investors are taxed at the rate of 15% on dividend income and 30% on all other in- come and that the corporate tax rate is 30 percent. Also assume that the new company is expected to earn $400,000 of cash income before taxes during its first year of operation. All earnings are expected to be immediately distributed to the owners.
Required
Calculate the amount of after-tax cash flow available to each investor if the business is established as a partnership versus a corporation. Write a memo explaining the advantages and disadvantages of these two forms of business organization. Explain why a limited liability company may be a better choice than either a partnership or a corporation.
Indicate the account names and adjusted balances that should be reported on Jaworski's year-end balance sheet and income statement.
Kelso Co. receives $479,000 when it issues a $479,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2010. The terms provide for semiannual installment payments of $30,660 on June 30 and December 31.
Journalize the entries to record (a) the flow of costs into the Refining Department during the period for
Debt equity ratio of 0.70, building a new $45 million manufacturing facility. cash flow of $6.2 million in perpetuity. the flotation costs of the new common stock would be 8% of the amount raised, The required return on the company's new equity is..
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date.
determine the tax liability marginal tax rate and average tax rate in each of the following cases. use the form 1040ez
What types of costs are included in raw material inventory, work-in-process inventory, and finished goods inventory?
Sally vaguely remembers her tax professor in college warning the class that some real estate agents tend to oversell the tax benefits of home ownership. What factors would cause the actual tax savings of a $28,000 mortgage payment to be less than ..
Bonds, D, Inc. bonds are selling for $1,000 each with an interest rate of 7%. Tax-exempt bonds issued by the State of Kentucky are selling for $1,000 each with an interest rate of 3%. Which bond provides a taxpayer with the higher after-tax return..
The Banner Mattress and Furniture Company wishes to study the number of credit applications received per day for the last 300 days. The information is reported below:
Kestral's accountant mistakenly assumed considerable influence and used the equity method instead of the cost method. What is the impact on the investment account and net earnings, respectively?
suppose that snowcastles reputation has diminished and other resorts in the vicinity are changing only 60 per lift
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