Compute the tax and dividend payment

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Bently Poster Company pays income taxes on net income at the rate of 32 percent. The company pays a bonus to its officers of 8 percent of net income after taxes and pays dividends to its shareholders in the amount of 75 percent of net income after taxes. On January 1, 2017, the company purchased equipment for $400,000. This asset is usually depreciated over a ten-year period. Salvage value is expected to be zero. Assume that the bonus payment is not included as an expense in the calculation of taxable income and reported income.

Assume that sales and operating expense (excluding depreciation) for 2017 are $250,000 and $140,000, respectively.

Question (a) Compute the tax, bonus, and dividend payment for 2017 if the company uses the straight-line method of depreciation.

Reference no: EM132651083

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