5-2 Final Project Milestone Two: Income Taxes and PensionsIII.Income TaxesIf Congress voted to...

Question

5-2 Final Project Milestone Two: Income Taxes and Pensions

III.Income Taxes

If Congress voted to eliminatecorporate taxes, what would be the effect on your company's income statement and balance sheet? Defend your response.
Calculate the income tax rate for your chosen company. What effect will anincrease in incomeof $2,000,000 have on your company?
What are theeffectson the balance sheet and income statement? Justify your response.
How much did your company pay inforeign taxeslast year? What percentage of its income is United States vs. foreign?

V.Pensions
Address the following elements in the form of a memo to your CEO:

From your company's financial information, what type ofpension plandoes it have? Discuss the reasons why your company has chosen this particular plan.
What was theeffectof the pension plan on your company's financial statements? Defend your response.
Your CEO has informed you—the controller of your company—that the board of directors has made the decision to look atother optionsof types of retirement plans. Investigate what other alternatives would be available, and determine which would be appropriate for your particular company.

acc-620-milestone-two-guidelines-and-rubric-kde0fmvi.pdf

Preeta · Accepted Answer

III. INCOME TAXES:
A. Elimination of Corporate Tax:
If the Congress would have voted to totally eliminate corporate taxes then that will be a beneficial situation for the chosen company, Costco. Elimination of the corporate tax from the income statement of the company will improve the profit of the company (Fehr et al., 2013). In balance sheet one side the profit will improve the equity and on the other hand those profits can be utilized to acquired assets. The increased profit amount can be distributed among the shareholders and if invested in some new projects it will create job opportunities. So, eliminating the corporate tax will not only improve financial benefit for the company but will result in economic benefit of the society as a whole. 
B. Tax Rate:
It is clearly mentioned in the annual report of the company, the income tax rate for the company was 35% previously but due to the recent changes in the US federal laws, the rate has changed to 21%. So, currently the applied income tax rate on the company is 21%. 
So, if the company will have an increase in income of $2,000,000, then the company will have to pay extra taxes. So, at the rate of 21% the additional tax to be paid will be $420,000.  
C. Effect on Balance Sheet and Income Statement:
If income is increased then even after the deduction of tax there will be increase in the profit of the company. So, the effects on the income statement will be increase in revenue, increase in provision for corporate tax and increase in total attributable profit.
If there is increase in income then profit will increase so the owner’s equity or the shareholder’s equity will increase. If the income is generated from sales on credit then accounts receivable will increase and if the income is received against cash then cash will increase. Eventually when the amount will be received then accounts receivable will decrease and cash will increase.

5-2 Final Project Milestone Two: Income Taxes and Pensions III.Income Taxes If Congress voted to eliminatecorporate taxes, what would be the effect on your company's income statement and balance...

5-2 Final Project Milestone Two: Income Taxes and Pensions

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment