Wingo inc which has a 34 percent income tax rate also, Ask an Expert

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Wingo Inc. which has a 34 percent income tax rate ( also assume this is the applicable tax rate) is considering making a substantial investment in marketable securities that will generate annual income of $400,000. Analyze each of the following four scenarios:

a. The income is from tax-exempt bonds and Wingo will pay regular income tax but no AMT

b. the income is from devidends on publicly traded stock eligible for the 70 percent dividts received deduction and Wingo will pay regular income tax but no AMT.

c. The income is from tax-exempt bonds and Wingo is in an AMT position and has a positive ACE adjustment before consideration of the interest income.

d. The income is from dividends on publicly traded stock eligible for the 70 percent dividends received deduction and Wingo is in an AMT position and has a positive ACE adjustment before consideration of the interest income.

For each scenario:

- What is Wingo's after tax cash flow?

- How is this income reported for financial and taxable income?

- What is the journal entry to record the tax accrual?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92100164

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