In its first interim period, Deuce had $500 of income before taxes and an estimated annual tax rate of 40%.In its second interim, Deuce had $800 of income before taxes and its estimated annual tax rate changed to 30%.Deuce's tax expense for the second interim period was
A)$190
B)$240
C)$320
D)$390

Question

Quizplus · Accepted Answer

For the second interim period, Deuce's tax expense is calculated by adjusting for the change in the estimated annual tax rate. Initially, for the first interim period, the tax was calculated as $500 * 40% = $200. After the tax rate adjustment to 30%, the total estimated tax for the year on the income of $1300 ($500 + $800) would be $1300 * 30% = $390. Since $200 was already recognized in the first period, the additional tax expense for the second period is $390 - $200 = $190.

In Its First Interim Period, Deuce Had $500 of Income