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Compute after-tax income

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Johnson Company had revenue of $250,000 and incurred business expenses of $135,000 in 2010. Ed Johnson, owner of the company, is single, and has no dependents. He uses the $5,700 standard deduction in computing taxable income for 2010. The personal exemption amount for 2010 is $3,650. Johnson Company is Ed's only source of income. Compute Ed's after-tax income if:

a. Johnson Company is a sole proprietorship, and Ed withdraws $70,000 for living expenses during the year.

b. Johnson Company is a corporation, Ed is the sole shareholder, and the corporation pays out all of its after-tax income as dividends to Ed.

c. Johnson Company is a corporation, Ed is the sole shareholder, and the corporation pays Ed a salary of $86,900. Assume this will increase the corporation's business expenses to $221,900.

Reference no: EM13159329

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