Builtrite had sales of $700,000 and COGS of $280,000. In addition, operating expenses were calculated at...

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Builtrite had sales of $700,000 and COGS of $280,000. Inaddition, operating expenses were calculated at 25% of sales.Builtrite also received dividends of $50,000 and paid out commonstock dividends of $25,000 to its stockholders. A long-term capitalgain of $70,000 was realized during the year along with a capitalloss of $50,000.
1. What is Builtrite’s taxable income?
2. Based on their taxable income, what is Builtrite’s taxliability?
3. If we add to our problem that Builtrite also had $10,000 ininterest expense, which of the following statements is correct(assuming the same marginal tax rate of 39%)?
•Taxable income would increase by $10,000
•Taxable income would decrease by $10,000.
•Taxable income would decrease by $6,100.
•Taxable income would increase by $6,100
4. If Builtrite had experienced a long-term capital loss of$80,000 (instead of the $50,000 long-term capital loss stated inthe problem), and still had the $70,000 long-term capital gainstated in the problem, which of the following is correct:
•taxable income would decrease by $30,000
•taxable income would not change
•taxable income would decrease by $10,000
•taxable income would decrease by $20,000
5. (This problem is not related to the above problem) Last yearBuiltrite had retained earnings of $150,000. This year, Builtritehad true net profits after taxes of $80,000 and also paid apreferred dividend of $20,000. What is Builtrite’s new level ofretained earnings?

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Question 1 Sales 700000 COGS 280000 Operating Expense 700000 25 175000 EBIT 700000 280000 175000 245000 EBIT of company is 245000 70 of corporate dividend income is exempted from tax Taxable dividend payment 50000 30 15000 Net Capital gain See Answer

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Builtrite had sales of $700,000 and COGS of $280,000. Inaddition, operating expenses were calculated at 25% of sales.Builtrite also received dividends of $50,000 and paid out commonstock dividends of $25,000 to its stockholders. A long-term capitalgain of $70,000 was realized during the year along with a capitalloss of $50,000.1. What is Builtrite’s taxable income?2. Based on their taxable income, what is Builtrite’s taxliability?3. If we add to our problem that Builtrite also had $10,000 ininterest expense, which of the following statements is correct(assuming the same marginal tax rate of 39%)?•Taxable income would increase by $10,000•Taxable income would decrease by $10,000.•Taxable income would decrease by $6,100.•Taxable income would increase by $6,1004. If Builtrite had experienced a long-term capital loss of$80,000 (instead of the $50,000 long-term capital loss stated inthe problem), and still had the $70,000 long-term capital gainstated in the problem, which of the following is correct:•taxable income would decrease by $30,000•taxable income would not change•taxable income would decrease by $10,000•taxable income would decrease by $20,0005. (This problem is not related to the above problem) Last yearBuiltrite had retained earnings of $150,000. This year, Builtritehad true net profits after taxes of $80,000 and also paid apreferred dividend of $20,000. What is Builtrite’s new level ofretained earnings?