Eccentricity,Inc.had $300,000 in 2018 taxable income.Using the tax schedule from Table 2.3,what are the company's 2018 income taxes,average tax rate,and marginal tax rate,respectively?
A) $22,250, 7.42%, 39%
B) $78,000, 26.00%, 39%
C) $100,250, 33.42%, 39%
D) $139,250, 46.42%, 39%

Question

Eccentricity,Inc.had $300,000 in 2018 taxable income.Using the tax schedule from Table 2.3,what are the company's 2018 income taxes,average tax rate,and marginal tax rate,respectively? 
A) $22,250, 7.42%, 39% 
B) $78,000, 26.00%, 39% 
C) $100,250, 33.42%, 39% 
D) $139,250, 46.42%, 39%

Quizplus · Accepted Answer

From Table 2.3, the $300,000 of taxable income puts Eccentricity in the 39 percent marginal tax bracket. Thus,
Tax liability = Tax on base amount + Tax rate (amount over base): = $22,250 + .39 ($300,000 - $100,000) = $100,250
Note that the base amount is the maximum dollar value listed in the previous tax bracket. The average tax rate for Eccentricity Inc. comes to:
 11ea8218_2a60_6e61_bbd8_6d303248cc2f_TB1326_00 If Eccentricity earned $1 more of taxable income, it would pay 39 cents (its tax rate of 39 percent) more in taxes. Thus, the firm's marginal tax rate is 39 percent.