Chapter 2, Problem 4QP

Summary Introduction

To calculate: The income taxes of Company S

Introduction:

Income tax refers to the charge levied by the government on the income of the company. The company has a legal obligation to make tax payments. The tax rate differs based on the income of the company. The tax rate is as follows:

Taxable income	Tax rate
$0 to $50,000	15%
$50,001 to $75,000	25%
$75,001 to $100,000	34%
$100,001 to $335,000	39%
$335,001 to $10,000,000	34%
$10,000,001 to $15,000,000	35%
$15,000,001 to $18,333,333	38%
$18,333,334 and above	35%

Summary Introduction

To determine: The average tax rate

Introduction:

Average tax rate refers to the total amount of taxes paid by the company divided by its total taxable income.

Summary Introduction

To determine: The marginal tax rate

Introduction:

Marginal tax rate refers to the tax that the company must pay on the next dollar generated.