Question

Thomsonetics, Inc., a rapidly growing early-stage technology company, had the pretax income noted below for calendar years 2010-2012. The firm was subject to corporate taxes consistent with the rates shown in Table 2.6.

Year: Pretax Income:
2010 $87,000  
2011 $312,000
2012 $760,000

a. Calculate Thomsonetics' tax liability for each year 2010, 2011, and 2012.

b. What was the firm's average tax rate in each year?

c. What was the firm's marginal tax rate in each year?

TABLE 2.6

Taxable Income Over: Not Over: Tax 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%
18,333,333 ................. 35%

Answer 1