a) Assume an imputation tax system and show the values for A, B, C and...
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Accounting
a) Assume an imputation tax system and show the values for A, B, C and D below. Show all workings and attach a minus sign (-) to the value if it is a cash outflow. (4 marks)
Marginal tax rate
45%
19%
Corporate level
Net Profit Before Tax
$4
$4
Corporate tax (30%)
-$1.20
-$1.20
Net Profit After Tax
$2.80
$2.80
Shareholder level
Cash dividends
$2.80
$2.80
Gross-up adjustment
A
A
Grossed-up dividends
Personal Tax
Franking credit
Tax payable or refund
B
C
Dividend after taxes
D
b) Richmond Ltd has generated profits before tax in Australia of $20 million. Its corporate tax rate is 30% and Richmond has a retention rate of 60%. What is the value of franking credits? What is the value of undistributed franking credits? (3 marks)
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