Jurisdiction Z levies an excise tax on retail purchases of jewelry and watches. The tax equals 3 percent of the first $1,000 of the purchase price plus 1 percent of the purchase price in excess of $1,000.   Required: Individual C purchases a watch for $430. Compute C’s excise tax and average excise tax rate. Individual D purchases a watch for $4,420. Compute D’s excise tax and average excise tax rate. Is Jurisdiction Z’s excise tax vertically equitable?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Jurisdiction Z levies an excise tax on retail purchases of jewelry and watches. The tax equals 3 percent of the first $1,000 of the purchase price plus 1 percent of the purchase price in excess of $1,000.
 

Required:

  1. Individual C purchases a watch for $430. Compute C’s excise tax and average excise tax rate.
  2. Individual D purchases a watch for $4,420. Compute D’s excise tax and average excise tax rate.
  3. Is Jurisdiction Z’s excise tax vertically equitable?
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