Explanation:
Compute the tax bill of Corporation G:
The taxable income of $82,500 of Corporation G falls under three tax brackets. They are 15 percent, 25 percent, and 34 percent. Hence, the income tax of Corporation G is as follows:
Taxable income | Tax calculation | Income tax |
$50,000 | $50,000×15% | $7,500 |
$25,000 ($75,000−$50,000) | $25,000×25% | $6,250 |
$7,500 ($82,500−$75,000) | $7,500×34% | $2,550 |
Total income tax |
| $16,300 |
Hence, the tax bill of Corporation G is $16,300.
b)
Explanation:
Compute the tax bill of Corporation G after the increase in income:
The taxable income of $92,500 of Corporation G falls under three tax brackets. They are 15 percent, 25 percent, and 34 percent. Hence, the income tax of Corporation G is as follows:
Taxable income | Tax calculation | Income tax |
$50,000 | $50,000×15% | $7,500 |
$25,000 ($75,000−$50,000) | $25,000×25% | $6,250 |
$17,500 ($92,500−$75,000) | $17500×34% | $5,950 |
Total income tax |
| $19,700 |
Hence, the tax bill of Corporation G is $19,700.
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