Submitted by: Submitted by blanca
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Category: Other Topics
Date Submitted: 06/25/2013 08:33 PM
1-5 Corporate taxes. Tantor Supply, Inc., is a small corporation acting as the exclusive distributor of a major line of sporting goods. During 2000 the firm earned $92,500 before taxes.
SOLUTIONS:
a. Calculate the firm’s tax liability using the corporate tax rate schedule given in Table 3.4.
Total tax due = $13,750+ [0.34($92,500- $75,000)]
= $13,750+ (0.34× $17,500)
= $13,750+ $5,950
= $19,700 Tax liability
b. How much is Tanto Supply’s 2000 after-tax earnings?
After tax earning = Corporate earning before tax - tax due
= $92,500 - $19,700
= $72,800
c. What was the firm’s average tax rate, based on your findings in a?
Average tax rate = Tax due ÷ Corporate earning before tax
= $19,700 ÷ $92,500 =0.2129
0.2129 x 100
= 21.3%
d. What is the firm’s marginal tax rate, based on your findings in a?
Marginal tax rate = 34%
1-6 Average corporate tax rates. Using the corporate tax rate schedule given in Table 1.4, page 29, perform the following:
a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of corporate earnings before taxes: $10,000; $80,000; $300,000; $1.5 million; and $15 million.
SOLUTIONS:
($10,000) Total tax due = $0+ [0.15× ($10,000- $0)]
= $1,500
After tax earning = Corporate earning before tax - Tax due
= $10,000 - $1,500
= $ 8,500
Average tax rate = Tax due ÷ Corporate earning before tax
= $1,500 ÷ $10,000 = 0.15...