Ajax Company pays 15% on the first $50,000 of pretax income and 28% on any additional pretax income.Ajax Company currently earns $52,000.An investment under consideration is expected to add $20,000 in pretax income._____ is the rate on the additional income.

Question

Quizplus · Accepted Answer

The investment will add $20,000 in pretax income to the company's current income of $52,000, making a total pretax income of $72,000. Since the first $50,000 is taxed at 15%, the remaining $22,000 will be taxed at 28%. Therefore, the rate on the additional income is 28%.

Ajax Company Pays 15% on the First $50,000 of Pretax