Timmy Tappan is single and had $207,000 in taxable income. Using the rates from Table 2.3 in the chapter, calculate his income taxes. a. What is the average tax rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the marginal tax rate? (Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.) a. Average tax rate b. Marginal tax rate 22.40 % 32 %

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Please verify my answer if not correct please correct it
Timmy Tappan is single and had $207,000 in taxable income. Using the rates from Table
2.3 in the chapter, calculate his income taxes.
a. What is the average tax rate? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the marginal tax rate? (Do not round intermediate calculations and enter
your answer as a percent rounded to the nearest whole number, e.g., 32.)
a. Average tax rate
b. Marginal tax rate
22.40 %
32 %
Transcribed Image Text:Timmy Tappan is single and had $207,000 in taxable income. Using the rates from Table 2.3 in the chapter, calculate his income taxes. a. What is the average tax rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the marginal tax rate? (Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.) a. Average tax rate b. Marginal tax rate 22.40 % 32 %
E
X
P Pearson Sign In
X P Sign in
TABLE 2.3
Personal Tax Rates for 2020 (Unmarried Individuals)
@
2
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< 30 of 617 >
important points about taxes for such entities, we take a look at personal tax rates in ravie 2.3. AS SHOWII, III ZUZU, there are seven tax
brackets, ranging from 10 percent to a high of 37 percent, down from 39.6 percent in 2017.
#3
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X P Pearson Sign In
$
Taxable Income
$ 0-
4
9,875
9,875
40,125
40,125- 85,525
85,525- 163,300
163,300-207,350
207,350-518,400
518,400+
AVERAGE VERSUS MARGINAL TAX RATES
In making financial decisions, it is frequently important to distinguish between average and marginal tax rates. Your average tax rate is
your tax bill divided by your taxable income-in other words, the percentage of your income that goes to pay taxes. Your marginal tax rate
is the rate of the extra tax you would pay if you earned one more dollar. The percentage tax rates shown in Table 2.3 are all marginal
rates. Put another way, the tax rates in Table 2.3 apply to the part of income in the indicated range only, not all income.
The difference between average and marginal tax rates can best be illustrated with an example. Suppose you are single and had a taxable
income of $100,000 in 2020. What was your tax bill? Using Table 2.3, we can figure your tax bill:
%
X M Question 2 - Chapte X
5
.10 ($9,875)
= $ 987.50
.12 ($40, 125-9,875) = 3,630.00
.22 ($85,525-40, 125) 9,988.00
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2.3 Taxes
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Tax Rate
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22
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35
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Transcribed Image Text:E X P Pearson Sign In X P Sign in TABLE 2.3 Personal Tax Rates for 2020 (Unmarried Individuals) @ 2 prod.reader-ui.prod.mheducation.com/epub/sn_3bb4d/data-uuid-13810c1e463f411c824b01e513993771#data-uuid-3e9aa40508cd41819f743c300f... ☆ O < 30 of 617 > important points about taxes for such entities, we take a look at personal tax rates in ravie 2.3. AS SHOWII, III ZUZU, there are seven tax brackets, ranging from 10 percent to a high of 37 percent, down from 39.6 percent in 2017. #3 с X P Pearson Sign In $ Taxable Income $ 0- 4 9,875 9,875 40,125 40,125- 85,525 85,525- 163,300 163,300-207,350 207,350-518,400 518,400+ AVERAGE VERSUS MARGINAL TAX RATES In making financial decisions, it is frequently important to distinguish between average and marginal tax rates. Your average tax rate is your tax bill divided by your taxable income-in other words, the percentage of your income that goes to pay taxes. Your marginal tax rate is the rate of the extra tax you would pay if you earned one more dollar. The percentage tax rates shown in Table 2.3 are all marginal rates. Put another way, the tax rates in Table 2.3 apply to the part of income in the indicated range only, not all income. The difference between average and marginal tax rates can best be illustrated with an example. Suppose you are single and had a taxable income of $100,000 in 2020. What was your tax bill? Using Table 2.3, we can figure your tax bill: % X M Question 2 - Chapte X 5 .10 ($9,875) = $ 987.50 .12 ($40, 125-9,875) = 3,630.00 .22 ($85,525-40, 125) 9,988.00 ^ G Search or type URL 6 MacBook Pro = & 7 2.3 Taxes * 8 Tax Rate 10% 12 22 24 32 35 37 ( + ( 1.11 9 X Timmy Tappan is s ) 0 Page 034 Aa Î ← € + = X +
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