Question

As of 2015, ranches were taxed at 13 percent for income up to $42,000; at 20 percent for income ranging from $42,000 to $71,000; at 26 percent for taxable income $71,000 to $98,000; at 42 percent for income from $98,000 to $112,000, and so on. Suppose that you have revenues of $172,800 and operating expense of $69,500. (i) What is the amount of the taxable income? a. $242,300 b. $76,442 c. $103,300 d. $172,800 e. None of the answers are correct Enter Response Here: (ii) How much tax is paid on the first $42,000 of the taxable income? a. $5,460 b. $2,226 c. $5,800 d. $7,020 e. None of the answers are correct. Enter Response Here: (iii) How much tax is paid on the first $71,000 of the taxable income? a. $5,800 b. $14,200 c. $11,260 d. $9,230 e. None of the answers are correct Enter Response Here: (iv) How much tax is paid on the total taxable income? a.$127,800 b. $20,506 c. $69,500 d. $2,226 e. None of the answers are correct Enter Response Here: (v) What is the average tax rate? a. 26.83% b. 8.46% c. 10.58% d. 19.85% e. None of the answers are correct Enter Response Here: (vi) What is the marginal tax rate? a. $13% b. 20% c. 26% d. 42% e. None of the answers are correct Enter Response Here: The answers will not be none of the above

Answer 1

Answer (i):

Correct answer is:

c. $103,300

Explanation:

Taxable Income = Revenues - Operating expense = 172800 - 69500 = $103,300

Taxable Income = $103,300

Hence option c is correct and other options a, b,d and e are incorrect.

Answer (ii):

Correct answer is:

a. $5,460

Explanation:

Tax paid on the first $42,000 of the taxable income =42000 * 13% = $5,460

Hence option a is correct and other options b, c, d and e are incorrect.

Answer (iii):

Correct answer is:

c. $11,260​​​​​​​

Explanation:

Tax paid on the first $71,000 of the taxable income =42000 * 13% + (71000 - 42000) * 20% = $11,260

Hence option c is correct and other options a, b, d and e are incorrect.

Answer (iv):

Correct answer is:

b. $20,506​​​​​​​

Explanation:

Tax paid on the first $71,000 of the taxable income =42000 * 13% + (71000 - 42000) * 20% + (98000 - 71000) * 26% + (103300 - 98000) * 42% = $20,506

Hence option b is correct and other options a, c, d and e are incorrect.

Answer (v):

Correct answer is:

d. 19.85% ​​​​​​​

Explanation:

Average tax rate = Total pay liability / Taxable income = 20506 / 103300 = 19.85%

Hence option d is correct and other options a, b, c and e are incorrect.

Answer (vi):

Correct answer is:

d. 42%

Explanation:

Please answer iv above. Marginal tax rate is = 42%

Hence option d is correct and other options a, b, c and e are incorrect.