Question

2018 Individual Tax Rates
Single Individuals
If Your Taxable Income Is	You Pay This Amount on the Base of the Bracket	Plus This Percentage on the Excess over the Base (Marginal Rate)		Average Tax Rate at Top of Bracket
Up to $9,525	$0	10.0	%	10.0	%
$9,525 - $38,700	952.50	12.0		11.5
$38,700 - $82,500	4,453.50	22.0		17.1
$82,500 - $157,500	14,089.50	24.0		20.4
$157,500 - $200,000	32,089.50	32.0		22.8
$200,000 - $500,000	45,689.50	35.0		30.1
Over $500,000	150,689.50	37.0		37.0

Standard deduction for individual: $12,000

Married Couples Filing Joint Returns
If Your Taxable Income Is	You Pay This Amount on the Base of the Bracket	Plus This Percentage on the Excess over the Base (Marginal Rate)		Average Tax Rate at Top of Bracket
Up to $19,050	$0	10.0	%	10.0	%
$19,050 - $77,400	1,905.00	12.0		11.5
$77,400 - $165,000	8,907.00	22.0		17.1
$165,000 - $315,000	28,179.00	24.0		20.4
$315,000 - $400,000	64,179.00	32.0		22.8
$400,000 - $600,000	91,379.00	35.0		26.9
Over $600,000	161,379.00	37.0		37.0

Standard deduction for married couples filing jointly: $24,000

Quantitative Problem: Jenna is a single taxpayer. During 2018, she earned wages of $116,000. She doesn't itemize deductions, so she will take the standard deduction to calculate 2018 taxable income. In addition, during the year she sold common stock that she had owned for five years for a net profit of $7,900. How much does Jenna owe to the IRS for taxes? Do not round intermediate calculations. Round your answer to the nearest cent.

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Corporate

Corporations earn most of their income from operations; however, they may also receive interest and dividend income..(Blank) income is taxed as ordinary income; however, income is taxed more favorably. 50% of (Blank) received is excluded from taxable income, while the remaining 50% is taxed at the ordinary tax rate. For businesses, (Blank) payments are regarded as an expense so they are tax deductible; however, (Blank) payments are not tax deductible. Consequently, our tax system encourages (Blank) financing over (Blank) financing. Depreciation expense is tax deductible, so the larger the depreciation, the (blank) the taxable income, the (Blank) the taxes, and the (Blank) the firm's operating cash flow.

Quantitative Problem: Andrews Corporation has income from operations of $237,000. In addition, it received interest income of $23,700 and received dividend income of $29,600 from another corporation. Finally, it paid $10,700 of interest income to its bondholders and paid $44,100 of dividends to its common stockholders. The firm's federal tax rate is 21%. What is the firm's federal income tax? Do not round intermediate calculations. Round your answer to the nearest dollar.

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Answer 1

Jenna is single tax payer, she earned $116,000 in wages and net profit at $7,900. The total income derived by jenna is as follows: -

Total income=Wages earned+ Net profit

Total income=$116,000+ $7,900

Total Income=$123,900

The income lies at slab of $82,500 to $157,500. Compute the taxes: -

Tax=$14,089.50+0.24x(Amount excess over $82,500)

Tax=$14,089.50+0.24x($123,900-$82,500)

Tax=$14,089.50+0.24 x($41,400)

Tax=$14,089.50+$9,936=$24,025.5

Taxable income=(Income earned from business operations-Interest payments)+Interest income+0.5 x dividend payments

Taxable Income=($237,000-$10,700)+$23,700+0.5 x $29,600

Taxable Income=($226,300)+$23,700+$14,800

Taxable income=$264,800

Taxes=tax rate x Taxable income

Taxes=0.21 x $264,800=$55,608