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The Walstore Shoe Market had $1,875,000 of shoe sales and its cost for these shoes was $688,000. In addition, Shoe Market received $5,000 of corporate bond interest and $6,000 interest on State of California bonds. It paid $512,000 in salaries and had $552,000 of other operating expenses. What is Shoe Market’s taxable income? What is its income tax liability?
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| Computation of Taxable Income | ||
| Particulars | $ | |
| Shoe Sales | 1875000 | |
| Less: Cost of the shoes | (688000) | |
| Add: Corporate Bond Interest | 5000 | |
| Less: Salaries | (512000) | |
| Less: Operating Expenses | (552000) | |
| Taxable Income | 128000 | |
| Note: Interest on State of California Bonds is exempt from tax and the same has been ignored for the purpose of computation of Taxable Income | ||
| Computation of Income Tax Liability | |||
| Particulars | Amount ($) | Rate of Tax (%) | Income Tax = (Amount * Rate of Tax) |
| On First | 50000 | 15 | 7500 |
| On Next | 25000 | 25 | 6250 |
| On Next | 25000 | 34 | 8500 |
| On Remaining | 28000 | 39 | 10920 |
| Total Income Tax Liability | 33170 | ||
