Question

Microchip Inc. had the following profits and losses in the years indicated.

2013	$  5,500,000
2014	350,000
2015	(4,000,000)

Corporate Income Tax Schedule
Income ($)	Rate (%)
0 - 50,000	15
50,000 - 75,000	25
75,000 - 100,000	34
100,000 - 335,000	39
335,000 - 10,000,000	34
10,000,000 - 15,000,000	35
15,000,000 - 18,333,333	38
Over 18,333,333	35

How much federal tax will it eventually pay for 2013? The corporate rate schedule is the same for all three years. Use carry back to 2013 year. Round the answer to the nearest dollar.

Answer 1

Federal tax will it eventually pay for 2013

Microchip Inc. had profit in 2013 - $ 5,500,000

here is the given Corporate Income Tax Schedule and it is the same for all three years

Corporate Income Tax Schedule
Income ($)	Rate (%)
0 - 50,000	15
50,000 - 75,000	25
75,000 - 100,000	34
100,000 - 335,000	39
335,000 - 10,000,000	34
10,000,000 - 15,000,000	35
15,000,000 - 18,333,333	38
Over 18,333,333	35

calculation of federal tax for the 2013 profit of $ 5,500,000

Tax upto 50,000 = 50,000*15% = $7,500

Tax from 50,000 - 75,000 = 25,000*25% = $ 6,250

Tax from 75,000 - 100,000 = 25,000*34% = $ 8,500

Tax from 100,000 - 335,000 = 235,000*39% = $ 91,650

Tax from 335,000 - 5,500,000 = 5,165,000*34% = $1,756,100

Federal tax =$ 7,500+ $ 6,250 + $ 8,500 + $ 91,650 + $ 1,756,100

= $ 1,870,000