Question

Cranberry Corporation has $3,240,000 of current year taxable income.

1. If the current year is a calendar year ending on December 31, 2017, calculate Cranberry's regular income tax liability.
2. If the current year is a calendar year ending on December 31, 2018, calculate Cranberry’s regular income tax liability.
3. If the current year is a fiscal year ending on April 30, 2018, calculate Cranberry's regular income tax liability. (Do not round intermediate calculations.)

Answer 1

For the year ending on December 31, 2017, tax will be based on company tax rate schedule as shown in table here as follows:-

If taxable income is
Over	But not over	Tax is	Of amount over
$0	$50,000	15%	$0
50,000	75,000	$7,500 + 25%	50,000
75,000	100,000	13,750 + 34%	75,000
100,000	335,000	22,250 + 39%	100,000
335,000	10,000,000	113,900 + 34%	335,000
10,000,000	15,000,000	3,400,000 + 35%	10,000,000
15,000,000	18,333,333	5,150,000 + 38%	15,000,000
18,333,333	____	35%	0

Answer 1. The organization earn $3240000 taxable income.. Therefore, based on above table, income tax liability will be

113900 + 0.34 X (3240000-335000)

= 113900 + 0.34 X 2905000

= 113900 + 987700

= $1101600

Answer 2

For the year ending on December 31, 2018, Tax rate is flat 21%. Therefore,

Income tax liability= 3240000 X 0.21 = $680400

Answer 3

For the fiscal year ending on April 30, 2018 blended tax rate will be applicable in the proportion of the number of days

Number of days in the year 2017 for tax computation will be from May 01, 2017 to December 31, 2017 which is 245 days

Similarly,

Total Number of days in the year 2018 for tax computation will be from January 01, 2018 to April 30, 2018 which is 120 days

So,

Total income tax liability = (245/365) X income tax liability in 2017 + (120/365) X income tax liability in 2018

= (245/365) X 1101600 + (120/365) X 680400

= 739430.137 + 223693.1507

= 963123.2877 = $963123