The glenna gayle company (GGC) had sales of $400,000 in the past year, with operating expenses of $210,000 and cost of goods sold of $70,000. Interest expense was $30.000, and $10,000 in common stock dividends were received. The company had $20,000 in capital gains and $30,000 in capital losses during the year. Compute the taxable income of GGC and tax liability.
To compute the taxable income of GGC and tax liability, we need to follow certain steps and calculations. Here's how we can calculate it:
Step 1: Calculate the net sales
Net Sales = Sales - Cost of Goods Sold (COGS)
Net Sales = $400,000 - $70,000
Net Sales = $330,000
Step 2: Calculate the Gross Profit
Gross Profit = Net Sales - Operating Expenses
Gross Profit = $330,000 - $210,000
Gross Profit = $120,000
Step 3: Calculate the Net Operating Income (NOI)
NOI = Gross Profit - Interest Expense
NOI = $120,000 - $30,000
NOI = $90,000
Step 4: Calculate the Capital Gains/Losses
Capital Gains/Losses = Capital Gains - Capital Losses
Capital Gains/Losses = $20,000 - $30,000
Capital Gains/Losses = -$10,000
Step 5: Calculate the Taxable Income
Taxable Income = NOI + Capital Gains/Losses - Dividends Received
Taxable Income = $90,000 - $10,000 - $10,000
Taxable Income = $70,000
Step 6: Calculate Tax Liability
Tax Liability is calculated using the applicable tax rate. Without knowing the tax rate, we cannot provide an exact answer. However, I can show you an example assuming a 30% tax rate.
Tax Liability = Taxable Income * Tax Rate
Tax Liability = $70,000 * 0.30
Tax Liability = $21,000
Please note that the tax rate may vary based on various factors, including the country and tax regulations. It's recommended to consult a tax professional or refer to the specific tax regulations applicable to the company for accurate calculations.