### Interest versus dividend income during the year just ended

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Interest versus dividend income During the year just ended, Shering Distributors, Inc., had pretax earnings from operations of \$490,000. In addition, during the year it received \$20,000 in income from interest on bonds it held in Zig Manufacturing and received \$20,000 in income from dividends on its 5% common stock holding in Tank Industries, Inc. Shering is in the 40% tax bracket and is eligible for a 70% dividend exclusion on its Tank Industries stock. a. calculate the firm's tax on its operating earnings only. b. find the tax and the after-tax amount attributable to the interest income from zig manufacturing bonds. c. find the tax and the after-tax amount attributable to the dividend income from the tank industries, inc., common stock. d. compare, contrast and discuss the after-tax amounts resulting from the interest income and dividend income calculated in parts b and c. e. what is the firm's total tax liability for the year?

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