Nicole’s employer, Poe Corporation, provides her with an automobile allowance of $20,000 every other year. Her...

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Nicole’s employer, Poe Corporation, provides her with an automobile allowance of $20,000 every other year. Her...

Nicole’s employer, Poe Corporation, provides her with an automobile allowance of $20,000 every other year. Her marginal tax rate is 32 percent. Answer the following questions relating to this fringe benefit.

What is Poe’s after-tax cost of providing the auto allowance?

There is not any information about tax rate applicable to the company.

business accounting

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Answer 1

Answer #1

The tax rate applicable to company is 35%.

Thus,

After-tax cost of Poe Corporation = Allowance provided to Nicole*(1 – Tax)

= $20,000*(1 – 35%)

= $20,000*65%

= $13,000

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Answer 2

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