Ch13Solutions

# Ch13Solutions - .1 Graduated rates higher taxable incomes...

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Unformatted text preview: Chapter 13 13.1 Graduated rates: higher taxable incomes pay taxes at higher rates. Marginal rate: The portion of each taxable dollar of TI that is paid in taxes, e.g., 34%. Indexing: Updating of the TI limits (not the rates) each year to account for inflation and other factors. 13.2 (a) Doubleday: T e = 9.2 + (1-0.092)(34) = 40.07% TI (in millions) = 2.8 + 0.9 1.4 0.85 = \$1.45 Merritt-Douglas: T e = 7.5 + (1-0.075)(34) = 38.95% TI (in millions) = 4.7 + 0.25 3.1 0.97 = \$0.88 (b) Use the average federal tax rate of 34%, not the total effective rate T e. Doubleday: Federal tax estimate = 1,450,000(0.34) = \$493,000 Merritt-Douglas: Federal tax estimate = 880,000(0.34) = \$299,200 (b) Doubleday: Taxes = 113,900 + 0.34(1,450,000 335,000) = \$493,000 Percent of revenue = 493,000/3.7 million = 13.3% Merritt-Douglas: Taxes = 113,900 + 0.34(880,000 335,000) = \$299,200 Percent of revenue = 299,200/4.95 million = 6.0% Doubleday M-D T e 40.07% 38.95% TI \$1,450,00 \$880,000 Tax estimate \$493,000 \$299,200 Tax (table) \$493,000 \$299,200 % revenue 13.3% 6.0% 13.3 (a) T e = 9.8 + (1 0.098)(31%) = 37.76% TI = 4.9 2.1 1.4 = \$1.4 million Tax estimate = 1.4 million(0.3776) = \$528,640 (b) 528,640/4.9 million = 10.8% 13.4 (a) TI = 320,000 149,000 95,000 = \$76,000 (b) Use Table 13-1 13- 1 Taxes = 13,750 + 0.34(76,000-75,000) = \$14,090 (c) T e = 10.5 + (1 0.105)(18.5 = 27.06% Tax estimate = 76,000(0.2706) = \$20,566 Percent of GI = 20,566/320,000 = 6.43% 13.5 Corporation: TI = GI expenses depreciation Individual: TI = Salaries and wages personal exemptions deductions Some differences are: Depreciation versus deductions (no depreciation for individuals) Business expenses versus exemptions (corporation has expense advantage) GI from sales versus salaries and wages 13.6 Single: Use tax rates for filing single in Table 13-2. TI = 75,000 + 5000 8450 = \$71,550 Taxes = 0.10(7825) + 0.15(31,850-7825) + 0.25(71,550-31,850) = 782.50 + 3603.75 + 9925 = \$14,311 Total taxes are 2(14,311) = \$28,622 Married: Use tax rates for filing married and jointly in Table 13-2. TI = 150,000 + 10,000 16,900 = \$143,100 Taxes = 0.10(15,650) + 0.15(63,700-15,650) + 0.25(128,500-63,700) + 0.28(143,100-128,500) = 1565 + 7207.50 + 16,200 + 4088 = \$29,060 Marriage penalty is 29,060 28,622 = \$438 13.7 (a) Using effective rate of 25% to estimate taxes. Ads++: TI = 173,000 58,000 10,000 = \$105,000 Tax estimate = 0.25(105,000) = \$26,250 Single: TI = 95,000 3300 5150 = \$86,550 Tax estimate = 0.25(86,550) = \$21,638 13- 2 (b) Using tax rate Tables 13-1 (corporate) and 13-2 (filing single). Ads++: TI = \$105,000 Taxes = 22,250 + 0.39(105,000-100,000) = \$24,200 Single: TI = \$86,550 Taxes = 0.10(7825) + 0.15(31,850-7825) + 0.25(77,100-31,850) + 0.28(86,550-77,100) = 783 + 3604 + 11,313 + 2646 = \$18,346 The 25% estimated rate is too high since both corporate and individual tax estimates are higher than the tax table amounts.estimates are higher than the tax table amounts....
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## This note was uploaded on 03/24/2011 for the course ISEN 302 taught by Professor Ko during the Spring '08 term at Texas A&M.

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Ch13Solutions - .1 Graduated rates higher taxable incomes...

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