Homework Answers
(a)
Federal corporate tax rate = 21%
Taxable income = $100,000
Calculate the federal income tax -
Federal income tax = Taxable income * Federal corporate tax rate
Federal income tax = $100,000 * 0.21 = $21,000
The federal income tax is $21,000.
Calculate the state income tax -
State income tax = [Taxable income - Federal income tax] * State income tax rate
State income tax = [$100,000 - $21,000] * 0.096 = $7,584
The state income tax is $7,584
Calculate the total state and federal income tax -
Total tax = Federal income tax + State income tax = $21,000 + $7,584 = $28,584
The total state and federal income tax is closest to $28,586
Hence, the correct answer is the option (C).
(b)
Total state and federal income tax = $28,586
Taxable income = $100,000
Calculate the effective incoome tax rate of corporation -
Effective income tax rate = [Total state and federal income tax/Taxable income] * 100
Effective income tax rate = [$28,586/$100,000] * 100 = 28.56 or 29%
The corporation's effective income tax rate is closest to 29%.
Hence, the correct answer is the option (D).
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