Amanda Co has net income before taxes of $227,750, including $51,544 in interest revenue from municipal...
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Amanda Co has net income before taxes of $227,750, including $51,544 in interest revenue from municipal bonds and $5,358 paid for nondeductible officers' life insurance premiums. The actual tax rate is 18%. What is the effective tax rate for the current year? Answer as a percentage, round to 2 decimals. |
Homework Answers
Answer
Effective tax rate is 14.35%
Explanation
Income tax expense is computed using the equation given below:
Income tax expense = Taxable income * Actual tax rate
= {$227,750 + $5,358 - $51,544} * 18%
= $181,564 * 18%
= $32,681.52
Effective tax rate is computed using the equation given below:
Effective tax rate = Income tax expense / Net income before taxes
= $32,681.52 / $227,750
= 14.35%
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