Raising Funds

How a business manages its finances is a key factor in whether or not that business succeeds.

Where do businesses find the money to get started?

Lesson Objective

Compute the taxable income and the corporate income tax.

Content Vocabulary

corporationcorporation

Businesses owned by stockholders.

corporation

Businesses owned by stockholders.taxable income

taxable income

The portion of a company’s gross income that remains after normal business expenses are deducted, upon which taxes are based.

taxable income

The portion of a company’s gross income that remains after normal business expenses are deducted, upon which taxes are based.

Dot-Software had a gross income of $558,145 for the year. It had the following business expenses during the year:

Example 1Example 1

What federal corporate income tax must Dot-Software pay?

Example 1 (cont.)Example 1 (cont.)

Find the total deductions (expenses).

Total for the table is $464,615 in deductions.

Example 1 Answer: Example 1 Answer: Step 1Step 1

Find the taxable income.

Annual Gross Income – Deductions

$558,145 – $464,615 = $93,530

Example 1 Answer: Example 1 Answer: Step 2Step 2

Find the federal corporate income tax. (Refer to Figure 22.1 on page 682 of your textbook.)

$13,750 + 34% of ($93,530 – $75,000) =

$13,750 + (0.34 × $18,530) =

$13,750 + $6,300.20 = $20,050.20

Example 1 Answer: Example 1 Answer: Step 3Step 3

Use Figure 22.1 on page 682 of your textbook to find the federal corporate income tax.

The Aqua Bell Company has an annual gross income of $530,985.

Their deductions total $198,024.

Practice 1Practice 1

$113,104.79

Practice 1 AnswerPractice 1 Answer

Use Figure 22.1 on page 682 or your textbook to find the federal corporate income tax.

Gross income: $73,500

Deductions: $8,900

Practice 2Practice 2

$11,150

Practice 2 AnswerPractice 2 Answer