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Assignment two ch.2 1. Montgomery Enterprises, Inc., had operating earnings of $280,000 for the year just ended. During the year the firm sold stock that it held in another company for $180,000, which was $30,000 above its original purchase price of $150,000, paid 1 year earlier. a. What is the amount, if any, of capital gains realized during the year? b. How much total taxable income did the firm earn during the year? c. Use the corporate tax rate schedule given in Table 1.4 to calculate the firm's total taxes due. d. Calculate both the average tax rate and the marginal tax rate on the basis of your findings. 2. 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? 3. Michaels Corporation expects earnings before interest and taxes to be $40,000 for this period. Assuming an ordinary tax rate of 40%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $10,000 in interest. b. The firm pays $10,000 in preferred stock dividends. Assignment two ch.2 1. Montgomery Enterprises, Inc., had operating earnings of $280,000 for the year just ended. During the year the firm sold stock that it held in another company for $180,000, which was $30,000 above its original purchase price of $150,000, paid 1 year earlier. a. What is the amount, if any, of capital gains realized during the year? b. How much total taxable income did the firm earn during the year? c. Use the corporate tax rate schedule given in Table 1.4 to calculate the firm's total taxes due. d. Calculate both the average tax rate and the marginal tax rate on the basis of your findings. 2. 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? 3. Michaels Corporation expects earnings before interest and taxes to be $40,000 for this period. Assuming an ordinary tax rate of 40%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $10,000 in interest. b. The firm pays $10,000 in preferred stock dividends