Question

1 The Dakota Corporation had a 2021 taxable income of $18,000,000 from operations after all operating costs but before (1) Interest charges of $3,600,000, (2) dividends received of $300,000,(3) dividends pold of $2,100,000, and (6) income taxes (the firm's tax rate is 21 percent). a. Calculate Dakota's income tax liability. (Round your answer to the nearest dollar amount.) 0.5 points Income tax liability 03:52:02 elook References b. What are Dakota's average and marginal tax rates on taxable income? (Round your answers to 2 decimal places.) % Average tax rate Marginal tax rate %

Answer 1

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$18,000,000 $3,600,000 First we need to determine Dakota Co.'s taxable income: Income after operating costs Less: Interest Expense Add: Taxable dividend received (Only 30% of the $300,000 in dividends are taxable) Taxable income $90,000 $14,490,000 Tax liability = 21%*$14,490,000 Tax liabilty = $3,042,900 $3,042,900 Dakota co.'s marginal tax rate is 21% (the rate on the last dollar of income subject to tax) Dakota co.'s average tax rate is: Tax liability/ Taxable income Average tax rate = $3,042,900/$14,490,000 =21%