Question

Lancaster Inc. expects to have taxable income of $275,000 for 2016 and a tax credit of...

Lancaster Inc. expects to have taxable income of $275,000 for 2016 and a tax credit of $12,250. Assume that the graduated tax rate schedule is as follows:

$1-$100,000 15%

$100,001-200,000 22%

$200,001-460,000 28% + 5% surtax

$460,001 and above 30%

Required: Determine the tax expense for the first quarter, assuming that taxable income is $65,000.

Homework Answers

Answer #1
Estimated annual tax:
$100,000 x 15% $15,000
100,000 x 22%            22,000
75,000 x (28%+5%)            24,750
Total tax $61,750
Less: Tax Credit          (12,250)
Effective Tax            49,500
Effective tax rate = 49500÷275000
18%
So the first quarter tax expense will be $65,000 x 18%
$        11,700
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