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Corporate income? tax) G
Corporate income? tax) G. R. Edwin Inc. had sales of
$5.92 million during the past year. The cost of goods sold amounted to
$2.5 million. Operating expenses totaled $2.48 million, and interest expense was $29,000. Use the corporate tax rates to determine the? firm's tax liability. What are the? firm's average and marginal tax? rates?
The? firm's tax liability for the year is.
Expert Solution
| Computation of Taxable Income: | |
| Particulars | Amount |
| Sales | 5920000 |
| Less: Cost of Goods Sold | 2500000 |
| Gross Profit | 3420000 |
| Less: Operating Expenses | 2480000 |
| Operating Profit | 940000 |
| Less: Interest Expenses | 29000 |
| Taxable Income | 911000 |
| Computation of Firm's Tax Liability for the Year: | ||
| Particulars | Amount | |
| $0 - $50,000 | $50,000 * 15% | 7500 |
| $50,001 - $75,000 | $25,000 * 25% | 6250 |
| $75,001 - $100,000 | $25,000 * 34% | 8500 |
| $100,001 - $335,000 | $235,000*39% | 91650 |
| $335,001 - $911,000 | $576,000*34% | 195840 |
| Total Tax Liability for the Year | 309740 | |
|
G.R.Edwin Inc's Average Tax Rate = Total Taxes/Total Taxable Income |
|
= $309,740/$911,000 Average Tax Rate = 34% |
|
Marginal tax rate will be the rate of Tax paid on the last dollar earned which here in the given question is 34%. |
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