Based on the following table of the tax rates, what is the average tax rate for a firm with taxable income of $120,000?

Taxable Income ($)	Tax Rate
0 – 50,000	15%
50,000 – 75,000	25%
75,000 – 100,000	34%
100,000 – 335,000	39%

39%
20%
34%
25%
None of the above

Solutions

Expert Solution

Taxable Income = $120,000

Calculating the Tax Liability:-

Tax Bracket (amt in $)	Tax rate	calculation	Tax (amt in $)
0 -50,000	15%	50,000*15%	7500
50,000-75,000	25%	25,000*25%	6250
75,000- 100,000	34%	25,000*34%	8500
100,000 - 335,000	39%	20,000*39%	7800
		Total Tax Liability	30,050

Total tax Liability = $30,050

- Average Tax Rate = Total tax Liability/Taxable Income

= $30,050/$120,000

Average Tax Rate = 25.04%

So, the average tax rate for a firm is 25%

Option 4

jeff jeffy answered 2 years ago

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