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My question is based on Tirwen Co, December 2004, part C. Earnings of $1,050,000 should be grossed up to arrive at the earnings before tax of $1,500,000 but I can’t figure out how to do so. So can you please enlighten me. Thanks in advance!
For every $100 earnings before tax, they will pay $30 tax, and therefore the earnings after tax will be $70.
So for every $70 after tax, it grosses up to $100 before tax.
So 1,050,000 after tax grosses up to 100/70 x 1,050,000 = 1,500,000
Thank you so much Sir!
You are welcome 🙂