Thornton, Inc., had taxable income of $130,022 for the year. The company's marginal tax rate was 34 percent and its average tax rate was 23.5 percent. How much did the company have to pay in taxes for the year?
Thornton, Inc., had taxable income of $130,022 for the year. The company's marginal tax rate was 34 percent and its average tax rate was 23.5 percent. How much did the company have to pay in taxes for the year?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![### Tax Calculation Example
Thornton, Inc., had a taxable income of $130,022 for the year. The company's marginal tax rate was 34 percent, and its average tax rate was 23.5 percent. How much did the company have to pay in taxes for the year?
### Solution:
To determine how much Thornton, Inc. paid in taxes, we will use the following information provided:
1. **Taxable Income**: $130,022
2. **Average Tax Rate**: 23.5%
### Steps to Calculate Taxes Paid:
1. **Convert Average Tax Rate to Decimal Form**:
23.5% = 0.235
2. **Calculate the Total Taxes Paid Using the Average Tax Rate**:
\[
\text{Total Taxes Paid} = \text{Taxable Income} \times \text{Average Tax Rate}
\]
\[
\text{Total Taxes Paid} = 130,022 \times 0.235
\]
\[
\text{Total Taxes Paid} = 30,055.17
\]
Thus, Thornton, Inc. had to pay **$30,055.17** in taxes for the year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fce618159-930e-4ade-8eed-109751c2dc39%2F9f6d9d7b-f3d1-4ae3-9b35-d33209d06b61%2Fcy3kzc.png&w=3840&q=75)
Transcribed Image Text:### Tax Calculation Example
Thornton, Inc., had a taxable income of $130,022 for the year. The company's marginal tax rate was 34 percent, and its average tax rate was 23.5 percent. How much did the company have to pay in taxes for the year?
### Solution:
To determine how much Thornton, Inc. paid in taxes, we will use the following information provided:
1. **Taxable Income**: $130,022
2. **Average Tax Rate**: 23.5%
### Steps to Calculate Taxes Paid:
1. **Convert Average Tax Rate to Decimal Form**:
23.5% = 0.235
2. **Calculate the Total Taxes Paid Using the Average Tax Rate**:
\[
\text{Total Taxes Paid} = \text{Taxable Income} \times \text{Average Tax Rate}
\]
\[
\text{Total Taxes Paid} = 130,022 \times 0.235
\]
\[
\text{Total Taxes Paid} = 30,055.17
\]
Thus, Thornton, Inc. had to pay **$30,055.17** in taxes for the year.
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