The following data represents the complete taxable income history for a firm: What is the tax liability for 2016?

Question

The following data represents the complete taxable income history for a firm:  What is the tax liability for 2016?

Quizplus · Accepted Answer

The taxable income for 2016 was $40,000, which falls in the tax bracket of $37,651 to $91,150. The tax liability for this bracket is $5,400 plus 25% of the amount over $37,650, which in this case is $2,350. Therefore, the total tax liability for 2016 is $5,400 + $2,350 = $7,750. However, the firm had a tax credit of $1,750, bringing the total tax liability down to $6,000.

The Following Data Represents the Complete Taxable Income History for a Firm