Anderson, Inc.recently earned $125,000 in operating income. In addition, the com
ID: 2665950 • Letter: A
Question
Anderson, Inc.recently earned $125,000 in operating income. In addition, the company had interest income of $25,000 and $70,000 in dividend income. Anderson's interest expense was $40,000. The tax table is given as follows:Range of Taxable Income Base Tax Marginal tax rate
$0 to $50,000 $ 0 15%
50,000 to 75,000 7,500 25
75,000 to 100,000 13,750 34
100,000 to 335,000 22,250 39
335,000 to 10,000,000 113,900 34
10,000,000 to 15,000,000 3,400,000 35
15,000,000 to 18,333,333 5,150,000 38
Over 18,333,333 6,416,667 35
Using the corporate tax schedule above, what is Anderson's tax average tax rate?
A-25.4%
B-26.2%
C-27.8%
D-29.1%
E-30.3%
Explanation / Answer
Taxable income = operating income + interest income + dividend - interest expense = 125000 +25000 +70000 - 40000 = 180000 ($) taxable range $ tax base $ marginal tax rate % 0 to $50,000 $ 0 15% 50,000 to 75,000 7,500 25 75,000 to 100,000 13,750 34 100,000 to 335,000 22,250 39 tax = 22250 +(180000-100000)*0.39 = 53450 average tax rate = 53450/180000 *100 = 29.7% Hence , ANSWER is OPTION D .